UC-NRLF B4 $C 13 bb? m s.m.i GIFT or bureau of pail eco ' s WmM ' lilt CO 9n reflation Railroad Rates. ARGUMENT < ii J. H. Benton, Jr., Massachusetts Railroad Commission on petition for reduction in coal rates to brockton. June 29, 1 90 1. B< l ADIMS (ETCHELL, LAW PRI kli.v Street. 1901. / Ah^/&3(z 1 7 INDEX. • Page Acworth, W. M., Government Interference in .English Rail- way Management 51 Adams, Charles Francis, The Railroad Problem ... 41 Adams, Prof. Henry C, Statistician Interstate Commerce Commission ......... KO From J. H. BENTON, Jr., Ames Building. Boston, Competitive rates, lmisiraiiuns ui . -. : . . . /y Constitutionality of Massachusetts law as to revision of fares and freights 4 Cost of service cannot be ascertained 24 et seq. Cullom Congressional Committee Report .... 49 Dabney, W. D., Discussion of Rate Question. (Public Reg. of Railways, pp. 97, 98) 44 Distances as affecting rates ">34 Dixon, Prof., State Railroad Control 42 Eaton, J. Shirley, Railroad Operation 45. 46 Eminent Domain, Commonwealth may take railroads by right of 3 English Parliamentary Commission on Railway Amalgama- tion Report 40 English Parliamentary Commissioners, Statement to Parlia- ment 53 Excessive rate defined by Massachusetts commissioners . 9, 13, 15 Expenses of freight and passenger business cannot be separated 33 Fares and freights in Massachusetts, Original theory of regu- lation 2 Ah=z /£3 (^ -StU. <5L^>w>?tcc^ INDEX. _* Page Acworth, W. M., Government Interference in .English Rail- way Management 51 Adams, Charles Francis, The Railroad Problem ... 41 Adams, Prof. Henry C, Statistician Interstate Commerce Commission ......... 50 Alexander, E. P 49 Boston & Lowell Railroad, Act to incorporate ... 2 Boston & Worcester Railroad, Act to incorporate ... 2 Chanute, Octave, Investigation by 32 Coal business to Brockton % 67 Coal consumption not influenced by rate .... 70 Coal rates on New Haven 78 Coal rates on Boston & Maine, Central Vermont, and Boston & Albany roads . 76-78 Coal rates reduction on New Haven lines .... 82 Coal transportation, Character of, on New Haven -Road . 85 Cohn, Prof., Die Englische Eisenbahnpolitic ... 43 Competitive rates, Illustrations of 79 Constitutionality of Massachusetts law as to revision of fares and freights ......... 4 Cost of service cannot be ascertained . . . . 24 et seg. Cullom Congressional Committee Report .... 49 Dabney, W. D., Discussion of Rate Question. (Public Reg. of Railways, pp. 97, 98) 44 Distances as affecting rates 11, 34 Dixon, Prof., State Railroad Control 42 Eaton, J. Shirley, Railroad Operation ..... 45, 46 Eminent Domain, Commonwealth may take railroads by right of 3 English Parliamentary Commission on Railway Amalgama- tion Report ......... 40 English Parliamentary Commissioners, Statement to Parlia- ment 53 Excessive rate defined by Massachusetts commissioners . 9, 13, 15 Expenses of freight and passenger business cannot be separated 33 Fares and freights in Massachusetts, Original theory of regu- lation . . , , , 2 11 INDEX. Mas 1900 Fink, Albert, Statement of Fixing rates under a special statute . . Fluctuations in coal transportation ..... Fourth Annual Report Interstate Commerce Commission General Statutes of Massachusetts, i860, Regulation of fares and freights by . Grade crossings, Expense of abolition in Brockton Grade crossings, Expense of abolition by New Haven in sachusetts ........ Grierson on English and foreign railway rates Hadley, Prof., Railroad Transportation . Hendrick, Frank, Railway Control by Commissioners, Hepburn Committee, The, Statement from Report of Hudson, J. F., The Railways and the Republic Hunter, Railway Rates, 1889 Interstate Commerce Commission on general principle that owners of railroads should be left free to construct, own, and manage railroads ....... Interstate Commerce Commission v. Cincinnati, &c, Railway, 167 U.S. Rep. 479, &c Kirkman, Railway Accounts, vol. 1, p. 305 . . . . Kirkman, Addresses before World's Railway Commerce Con- gress ........... Larrabee, William, Railroad Question (railway rates discussed from granger standpoint) Le Rossignol, Prof., Monopolies Past and Present (1901) Newcomb, H. F., Report of Industrial Commission (1900) . Nimmo, Joseph, Jr., The Railroads as One System Operation of passenger department separate from freight de- partment, Railroad Commissioners' Report, 1873 . Parliamentary regulation of railway rates .... Power to fix rates not given to commissioner in Massachusetts Public Statutes of Massachusetts, 1880, Regulation of fares and freights by ........ Purchase of railroads, Right of commonwealth to purchase . Railway Commissioners of Maine, Report of 1874 Rates to be fixed by the directors ...... Reduction in rates in Massachusetts Reduction in coal rate to Brockton group .... Revised Statutes of Massachusetts, 1836, Regulation of fares and freights by Revision of fares and freights by legislature, Acts of 1870 and 1874 Sanford, John E., Statement as to impossibility of separating expenses of passenger and freight business Sax, Prof., As to Joint Cost 36, 37. 38 15 88 36 3 60 9i 38, 39 48 56 4 6 > 47 47 40 5i 56 43 53 49 56 42 55 34- 35 40 14 3 2 54 16 17, 18 65 33 43 INDEX. Ill Schoonmnker, Compendium of Transportation Theories, Ken- sington Series ......... 55 Seligman, Prof. Edwin K. A., Railway Tariffs ;uul the Inter- state Commerce Law 48 Special rate in Brockton ........ 61 Standard of reasonable rate as defined by Massachusetts Rail- road Commissioners . . . . . . . . 6, 7, et seq. Stickney, A. B., The Railway Problem 43 Superintendents of various roads in commonwealth on cost of freight traffic, Railroad Commissioners' Report, 1873 . 33 Taussig, Prof. F. W., Statement of ..... 41, 42 Van Oss, American Railroads as Investments ... 56 Walker, Aldace F., Amendment of the Interstate Commerce Law ........... 52 Mr. Chairman and Gentlemen of the Commission: The petition in this case alleges that the existing rate of seventy-five cents a ton for the carriage of coal from tide water to Brockton is " an excessive " rate, and that fifty cents is a reasonable rate for such carriage. The peti- tioners have introduced no evidence to show that the exist- ing rate is excessive as compared with other rates for simi- lar service, nor have they attempted to show that, upon comparison with other and general coal rates in the state, the rate is excessive. They have claimed, and their evi- dence has been wholly directed to show, that the existing rate is excessive in itself as compared with the cost of the service, and have claimed, without any evidence so far as I remember, that the general freight rates of the com- pany are higher than they ought to be. The petitioners seem to think that the board, in consider- ing the question of whether a rate for transportation is ex- cessive, have power to go beyond a comparison of that rate with other rates for similar services in the state, and although the rate may not be found to be excessive as com- pared with other rates, still adjudge it to be excessive in it- self upon other grounds. It is obvious that this view rests upon the proposition that the duty has been imposed upon the board to revise and fix rates for railroad transportation. I believe this view to be based upon a misapprehension of the law, and to be unsound in fact. I do not understand that the commissioners are required by law to revise, or can in fact revise and alter the existing tariffs of the railroad companies. This question which thus arises between the petitioners and the company is fundamental. It seems, therefore, proper to examine it before taking up the facts of the case itself. It is also obviously a most important question, and I shall therefore examine it at some length. The original theory of the regulation of fares and freights by railroads in Massachusetts was a revision of them with- in the limit of a return of 10 per cent upon the capital invested. This was provided for at first in the charter of each company, the provisions varying somewhat in the different charters. See — Act to incorporate the Boston & Lowell Railroad Corporation, Laws 1830, c. 4, sec. 5* Act to incorporate the Boston & Worcester Cor- poration, Laws 1831, c. 72, sec. 5- In 1836 this provision was embodied in the general law as section 83, chapter 39, Revised Statutes. This provided that the corporations might establish tolls upon passengers and property at such rates as might be determined by the directors, but that the legislature might from time to time, as they should deem expedient, alter or reduce such rates of toll according to the provisions, if any, contained in the charters of such corporations, provided that the tolls should not, without the consent of the corporation, be so reduced as to produce less than 10 per cent per annum return. At the same time the legislature provided that the common- wealth might at any time after twenty years from the open- ing of a railroad for use purchase the railroad by paying the corporation the amount of capital paid in, with a net profit thereon of 10 per cent per annum from the time of its payment by the stockholders. Rev. Sts. c. 39, sec. 84. 3 In i860 these provisions were re-enacted as sections 112 and 138, chapter 63, General Statutes. In 1870 the legislature repealed section 112, chapter 63, General Statutes, and provided that railroad corporations might establish fares, tolls, and charges at rates determined by their directors, but that such rates should be at all times subject to revision and alteration by the legislature, or such officers or persons as it might appoint for the purpose, anything in the charter of any railroad corporation to the contrary notwithstanding. Laws 1870, c. 325, sec. 1. Section 2 of the same act also provided that the common- wealth might at any time after one year's notice to a rail- road corporation take the road, franchise, and other prop- erty of the corporation by the right of eminent domain, paying such compensation as might be awarded by com- missioners, and, if the corporation was aggrieved by the award of the commissioners, assessed by a jury in the county of Suffolk. In the codification of the general rail- road laws of the commonwealth in 1874, tne legislature re-enacted this provision, asserting its right to regulate tolls, notwithstanding the provisions of the charters of the railroads. Laws 1874, c - 37 2 > sec - 4- And in 1880 these provisions were re-enacted in Public Statutes, chapter 112, sections 3, 180. Whether these provisions, by which the legislature at- tempted to repeal the special provisions of the early rail- road charters, limiting the right of the legislature to reduce fares or tolls so as to produce annually less than 10 per cent of the cost of the roads, was within the power of the legislature, has not been decided by the Supreme Court. Attorney General v. Old Colony Railroad, 160 Mass. 62, 84. If, however, we assume that the legislature could thus re- peal the provisions of the railroad charters, and regulate at its discretion all tariffs of fares and freights on the several railroads of the commonwealth, although they might there- by reduce the net earnings below 10 per cent upon the cost, we find that in 187 1 the railroad commissioners in their report, after a careful consideration of the subject, said that they were unable to see how any satisfactory results could be arrived at through such action. They said all legisla- tion in the direction indicated — "must be either general or special, — general as ap- plying to all the railroads of the Commonwealth, or special as applying to some individual one of them. No general law of this nature has yet been framed ad- equate to meet the wants of the case, though attempts at it have frequently been made; nor, indeed, do the Commissioners now see how such a law could be framed. Not that it is here meant to imply that the regulation of railroads by law is impracticable, but the doubt is confined to their regulation in this particular way. Other methods have been, and hereafter will be suggested, and the practical methods can only be as- certained after trial ; this method has, however, re- peatedly been tried, and with uniform result. ... A general law regulating fares and freights, which would very slightly touch one road, would inevitably ruin another. A tariff which would apply to one class of articles, would be simply ridiculous when applied to another. ... It is useless to discuss this question ; — a general law which shall meet the circumstances of all the separate roads and provide for all classes of freights, degrees of speed and arrangements for com- fort is a practical impossibility. It may, however, be urged that the law of 1870 was intended to pave a way for special legislation to meet individual cases. This is very probably the case ; — at the same time should the legislature undertake to follow out the plan indi- cated, and to specifically regulate the tariffs of each railroad of the Commonwealth, according to its parti- cular circumstances or the needs of its surrounding community, it will launch itself into an ocean of spe- cial legislation such as has never yet been attempted, and no large legislative body could successfully attend to. Should it delegate a power in this regard to the present or any other board of commissioners, it would simpty destroy it by so doing. A responsibility would be imposed unsustained by any executive power. An authority to regulate fares and freights over roads owned, controlled and operated by others, would place those in whom such authority was reposed in an en- tirely false and impossible position." R.R. Comrs. Report, 1871, pp. 58, 59. This declaration of the commissioners was made in view of the provisions of the act establishing the commission, chapter 408, Laws 1869; and especially with reference to the duty imposed upon the commissioners by section 3 of that act, in respect to informing railroad corporations of changes in rates which the commissioners might deem to be reasonable. The provision of that section with regard 6 to rates is now to be found in section 16, chapter 112, Pub. Sts., and has not been changed since its enactment in 1869. It is as follows : — "The board whenever it deems that repairs are necessary upon any railroad, or that an addition to its rolling stock or an addition to or change of its stations or station houses, or a change in its rates of fares for transporting freight or passengers or in the mode of operating its road and conducting its business, is rea- sonable and expedient in order to promote the security, convenience and accommodation of the public, shall in writing inform the corporation of the improvements and changes which it considers to be proper ; and a report of the proceeding shall be included in the annual re- port of the board." The first case that arose before the commission under this section is found in the appendix to their report for 1871. It was on the complaint of the selectmen of Freetown concerning rates of freight on cord wood on the New Bed- ford and Taunton railroad. The commissioners had then to'consider and definitely state the ground on which under the law they considered it was competent for them to take any action as to the rates of fares or freight. They stated it in this language : " In order to justify any action on the part of this Board it was necessary for the petitioners to prove at least one of three propositions, — "1. That the charges of the New Bedford and Taunton Railroad Company for the transportation of cord-wood were excessive as compared with those of other companies ; or " 2. That they were excessive as compared with the charges for other commodities of like bulk and weight as transported by themselves ; or "3. That the New Bedford and Taunton Railroad could for exceptional reasons transport with a fair profit to themselves cord-wood at unusually low freights." That is, the commissioners construed the law giving them authority with regard to fares and freights to author- ize them to deal only with the question whether a fare or a freight was excessive, — 1 st. As compared with a similar charge by other com- panies in Massachusetts ; or — 2d. As compared with charges by the same company for similar service ; or — 3d., Whether for exceptional reasons a particular service could be performed by any railroad at an unusually low rate. In other words, they refused to attempt to revise the entire tariff of the railroad. They assumed that the tariffs on railroads were on the whole reasonable, and confined their duty to ascertaining whether any particular rate for passengers or freight was excessive as compared with other rates, or whether in an exceptional case a profit could be made upon the particular class of freight or passengers by an unusually low rate. They then proceeded in that case by a table, which is printed in their opinion, to compare the freights for cord wood on other roads with the rates on the Taunton and New Bedford, and found that the rate on the New Bedford was $1.50 as against $1.37, on the average, on six other roads, and they decided that — 8 "The petitioners have failed to establish any proof of excessive charges against the corporation respon- dent, as compared with other roads of the Common- wealth." They then proceeded to compare the rates on cord wood with the rate charged for the transportation of other articles of similar bulk and weight by the Taunton and New Bed- ford road. This they did by a table, which is printed in their opinion, and they decided that — "from this comparison it does not appear that the petitioners have established the existence of any ex- cessive charge for the transportation of wood as com- pared with the average of similar articles specified on the tariff of the company." The commissioners then proceeded to consider whether any exceptional reason existed why the railroad should transport cord wood at unusually low rates, and decided that the petitioners had — "failed to establish any exceptional reason why the corporation could carry wood fuel at unusually low rates." They also said, — "This Board cannot decide that a charge not ma- terially in excess of the average charge on similar articles is unreasonable, unless it is -prepared to go on, and, when petitioned, to remodel the -whole tariff of this and other roads upon the basis thus laid down. Such a course is, at present, out of the question. The Commissioners must in every case not based on gen- eral complaints of extortion assume that the average charge on similar service is reasonable, and having ascertained that assume it as the standard." R.R. Comrs. Report, 1871, pp. 115-120. The rules thus carefully stated and published in their first decision upon rates have been followed by the com- mission in all cases since, and have never been questioned. In 1872 the commissioners applied this standard of "usual rates" to the question of whether the rates charged for season tickets was excessive, either as compared with rates for similar distances, or with rates charged for longer distances, and printed a table showing that in the case before them the rate was not excessive as compared with similar rates on other roads. R.R. Comrs. Report, 1872, pp. ccvi. ccviii. In 1877, upon a resolve of the legislature (c. 25, Re- solves, 1876), the commissioners investigated the rates charged upon coal between points on the Hudson river and points in Berkshire county. The citizens of Pittsfield, who appear to have been the moving parties in the inves- tigation, claimed, among other things, that the rate on coal into Berkshire county was in itself excessive. The com- missioners said that, in considering this complaint, — w It is necessary to arrive at a clear understanding of what is meant by a rate of freight which is in itself excessive. The commissioners presume that it must be some tariff imposition clearly and palpably out of proportion to the service rendered, constituting an ap- parent exaction through the enjoyment of a monopoly, or suggesting a suspicion that it originates rather in a desire on the part of the corporation opposing it not to 10 do business, or to direct business into some other channel, than in the expectation, of realizing undue profits from it." And in that case, while the commissioners said the rates were higher than they had recommended, and that the good policy of the corporation in exacting them might be called in question, yet the commissioners could not say that they were in themselves excessive. R.R. Comrs. Report, 1877, pp. 69, 70. The commissioners then proceeded to compare the rates in question with the rates for similar service on other rail- roads. They first drew a distinction, which they said was "so obvious" that it did not require to be dwelt upon, between the railroads which handled such large amounts of coal as enabled them to keep a large machinery for that purpose in constant and regular motion, and distributing roads which handled comparatively small amounts, deliver- ing them at numerous points. They then compared the rates with those of other similar distributing companies in New England, and printed a table of the rates of such companies for substantially similar distances. From this they said it appeared that the rates were nearly the " aver- age " rates per ton on other roads, and therefore held that the rates were not excessive upon that ground, saying, : — "Under these circumstances the commissioners have in conclusion to report that the transportation of coal into Berkshire county does not seem, so far as they can discover, to be carried on in any way essentially different from the way in which it is carried on in the other counties of the state.'"'' 11 And therefore they said, "Although it was very apparent that a reduction in the cost of the carriage of coal would have a bene- ficial effect on the manufacturing industries of the state, especially on those like glass or iron into which coal enters largely, they were not prepared to rec- ommend any reduction on the rates into Berkshire county." Id. pp. 76, 77. In this report the commissioners discussed the question of the comparative charge for short and for long distances, and said it could not be maintained that rates for carrying coal or any other merchandise comparatively short dis- tances' were excessive, because the charge for carrying each ton one mile was several times larger than it would be if the same ton were carried a great number of miles further. They illustrated this somewhat at length, con- cluding by saying that it was "no ground for complaint against the corporation that its rate per ton per mile on short local business was very much in excess of its rate per ton per mile on through business." In 1880, in a petition against the Eastern Railroad for reduction of fare, the commissioners declined to interfere, although they said that from a commercial point of view the railroad managers had made a serious mistake. They said, — " It is not for the Board of Railroad Commis- sioners TO UNDERTAKE TO INSTRUCT THOSE MAN- AGING THE ROADS AS TO THE PROPER WAY OF MAN- AGING THEM COMMERCIALLY, PROVIDED THEY DO NOT MANAGE THEM UNREASONABLY." 12 R.R. Comrs. Report, 1880, p. 219. In 188 1 the board were asked to recommend a reduc- tion in freights on coal on the Albany road. They pro- ceeded to compare the rates complained of on the Albany road between Palmer and Ware and other points on that part of the Albany road, with rates for like service, that is, for similar distances, on other roads, by tables which were printed in their decision, and said, — "It appears from this table that a minimum rate of fifty cents is usual, and the Board cannot say that it is unreasonable." R.R. Comrs. Report, 1881, p. 210. In 1882, upon a petition for reduction of fares between Boston and Stony Brook and Weston on the Massachusetts Central and Fitchburg roads, the commissioners said, — "Comparing Stony Brook and Weston with other stations of like distance, we find the following re- sult," — and then they print a table showing the fares for like dis- tance on other roads, and that the rates complained of were not substantially higher than such fares. Upon this they said it was " impossible to say that the fare to Stony Brook was unreasonable, and the Board would not be warranted in making any recommendation in regard to it." R.R. Comrs. Report, 1882, pp. 125, 127. In 1883, upon complaint of the selectmen of Pittsfield of alleged unreasonable rates upon coal and other commodi- ties on the Albany road they instituted a comparison with rates on other roads, and said that — 13 " Upon comparison with other and general coal rates in the state the rate charged does not seem to be an unreasonable amount to be received for the transportation of the coal in question." In this case they again restated the principle upon which the board had uniformly acted with regard to rates, saying, — " The question is not whether we consider the rate as exactly the right one, but whether it is so unrea- sonably high, so palpably out of proportion to the service rendered, that we should recommend a reduc- tion, and in case the recommendation is not complied with follow it with a call upon the General Court to revise it by special legislation." R.R. Comrs. Report, 1883, pp. 133, 134. In 1884 the commissioners were asked to recommend, a reduction of certain suburban passenger rates on the Bos- ton & Lowell Railroad, but they said that — " A comparison of suburban rates on the various roads within ten miles of Boston shows that the rates in question are as low as the average in like cases," — and therefore declined to recommend the reduction. It is to be observed that in this case the commissioners also said, — " It is our belief that the Boston and Lowell Rail- road would find it possible to reduce its rate at this and other similar stations, but as the Board had occa- sion to say before, on a like question, it is not, how- ever, for the Board of Railroad Commissioners to 14 undertake to instruct those managing the roads as to the particular way to manage them commercially, provided that they do not manage them unreasonably. It is unnecessary to say that on steam railroads we have no -power and we have no desire to have power to fix rates.' 1 '' R.R. Comrs. Report, 1884, pp. 150, 151. In 1885, upon a petition for the reduction of the coal rates from Boston to Lowell, twenty-six miles, from 85 cents to 65 cents a ton, the commissioners proceeded to compare the rate with that for similar service on other roads, and said, " A comparison of rates for like distances on other roads in this state utterly fails to show unrea- sonableness in the charge." They therefore declined to recommend a reduction. R.R. Comrs. Report, 1885, p. 130. In the same year, upon a petition for the reduction of passenger rates on the Boston, Revere Beach & Lynn Railroad, the commissioners said, — "It is hardly necessary to say that in Massa- chusetts the power of fixing rates has not been given to the Commissioners. Only when fares or rates are manifestly and palpably unreasonable, it is our duty to recommend a reduction ; and, if necessary, recom- mendation may be followed by an appeal to the legis- lature. A rate may appear to the Board to be un- wise, and calculated to produce discontent, and there- fore to injure the company ; but this does not author- ize us to recommend reduction if it is not unreason- able." Id. p. 139. 15 The board then said, — "We cannot pronounce these rates unreasonable by comparison with oilier roads" and refused to recom- mend a reduction, but did recommend a revision. Id. p. 139. In 1886 the commissioners had before them a complaint as to coal and other rates on the Housatonic railroad, and they proceeded to compare the rates complained of with the rates of all the other roads of the state for similar service, and printed a table of comparison which they said in their opinion showed by comparison the unreasonable nature of the charge, and upon that basis they recom- mended a reduction. R.R. Comrs. Report, 1886, pp. 33, 34. But the action of the commissioners in this case was under a special statute (c. 338, acts 1885) giving the board power to fix rates, so that, as the board subsequently said, they were substituted " by legislative power for the direct- ors and were bound to exercise a wider discretion as to rates than if dealing with a company in a normal condi- tion." * R.R. Comrs. Report, 1887, p. 81. In 1886, upon a complaint of excessive coal rates on the Albany road between Rockdale and Worcester, the com- missioners compared the rates for similar distances on the other roads of the state, and found that it was much lower in all cases than the rate complained of. They therefore held that the complaint was maintained, and recommended * For the order fixing rates under this statute see Comrs. Report, 1886, p.j 4 8. 16 a reduction to substantially the average rate of other roads. Comrs. Report, 1886, pp. 119, 122. In the same year, upon the question of whether coal rates from Springfield to West Springfield on the Albany road were excessive, they said that to compare the rate with the rates on other large coal-carrying roads is " ut- terly useless." They then proceeded to compare the rate with local rates on other Massachusetts roads, by a table which they said " does not show, or tend to show that the charge in question is unreasonable." They then added, — " The question for this Board is not whether we should, as Railroad managers, fix the rate just as it is fixed, nor whether we think that a reduction of a few cents would be wise and desirable. In order to justify our intervention it must be shown that the rate is clearly unreasonable." R.R. Comrs. Report, 1886, pp. 126, 127. In 1887, on a petition for the reduction of coal rates on the Albany road between North Adams and Pittsfield, the commissioners said that the rate was not " excessive as compared with the general rates charged on other roads," and printed a table showing those rates. They then said : "We have often had occasion to say, in deciding petitions like the present, that it is not enough to war- rant our interposition, that we think it would be wise and expedient to reduce rates. It must be shown that they are so unreasonable and excessive as to warrant "an appeal to the courts, or to the General Court, if our recommendation is disregarded. Up to that limit the directors are proper parties to fix rates." 17 R.R. Comrs. Report, 1887, pp. 79, 81. Again, in the same year, upon a petition for reduction of fares on the Albany road between Westboro and South- ville, they said that "to obtain such a recommendation it must be shown either that the rate is in itself unreasonably high, or that there is something in this case taking it out of the general rule," and then they add, " Neither in itself, nor by comparison with rates on other roads does the price seem to be unreasonably high." Id. p. 93. Since 1887 there has been comparatively little complaint to the commissioners as to rates, and there are therefore no opinions or orders on that subject. But in 1893 the com- missioners in their report reviewed the legislation with re- gard to regulation of rates, and showed that the policy of the state had been not to attempt to revise the tariffs of the railroad companies. They then stated what the result of this has been, and said that "Massachusetts has every rea- son to be satisfied " with the result of the policy. They stated that the average passenger fare per mile in Massa- chusetts was 1.83 cents, as against 2.03 cents in the Mid- dle states and a still higher rate for all other sections of the United States, so that passenger fares are " as low, and probably lower, in Massachusetts than in any other State." They also said, that — "While the lowest average freight rates per ton mile are of course to be found in those states through which passes the greatest proportionate bulk of long- haul freight on its way from the interior to the sea- board, it is safe to say that the rates arc not lower in any other state whose freight business as a whole is 18 similar to that of Massachusetts, and the most san- guine railroad reformer would hardly have ventured to predict twenty years ago a reduction^from 2.81 cents to 1.36 cents per average ton mile." , R.R. Comrs. Report, 1893, pp. 13, 16. Since 1893 the decrease in rates has continued. In 1899 tne passenger rate was 1.77 and the freight rate 1.18 per mile, and during the year ending June 30, 1900, the passenger rate was 1.75, and the freight rate 1.22 per mile. The slight increase in the freight rate was doubtless due to the fact that the Fitchburg carried less freight for export at excessively low rates in 1900 than in 1899. This rule, that upon the question of whether a particu- lar rate is excessive the commissioners will only inquire whether it is reasonable as compared with other rates for similar services in Massachusetts, has been acted upon by the commissioners for more than thirty years. It was es- tablished upon mature consideration, it has been frequently discussed and always confirmed by the board. It has the sanction not only of Charles Francis Adams and his asso- ciates, by whom it was first laid down, but also that of Thomas Russell, George G. Crocker, and John E. San- ford, and their able associates on this board. It has stood the test of argument and of experience. Under the ad- ministration of this rule by the board, railroad capital in Massachusetts has been safe, and the public have been well served. It may be urged that this rule leaves the tariffs to be made by the railroad companies, and that this is not wise. A sufficient answer to this objection, if made before the commissioners, would seem to be that this rule is one which the legislature itself has established, and therefore 19 its wisdom is not to be questioned here. The general law provides that the companies may establish fares, tolls, and charges at such rates as may be determined by their di- rectors, subject only to revision and alteration by the gen- eral court, or such officers or persons as it may appoint for that purpose. (P.S. section 180, chapter 112.) The legislature has never attempted to revise and alter railroad tariffs, nor has it appointed any officers or per- sons to revise and alter railroad tariffs in Massachusetts. It is true it has required the railroad commissioners to keep themselves informed with regard to the manner in which railroads are operated, and to inform any railroad corpora- tion of any change in its rates of fare for transporting freight or passengers, or in the mode of operating its road and conducting its business, which they deem expedient and reasonable in order to secure the convenience and ac- commodation of the public. (P.S. section 16, chapter 112.) But this obviously does not impose upon the commission- ers the duty of revising the tariffs of the railroads. The power conferred by this section is a power to recommend a change in rates, and is entirely different from the power to revise the rates referred to in section 180. The revi- sion and alteration referred to in section 180 is a fixing of rates by the legislature, or its officers or agents. That power has not been exercised by the legislature, either directly or through others, except in a very few special cases. That power is absolutely unlike the power con- ferred by section 16, which is only a power to recommend changes in rates which are found to be excessive, as com- pared with other rates for similar services. This distinction is clearly stated by the commissioners in Belair Manufacturing Company v. Boston & Albany Railroad, R.R. Comrs, Report, 1887, pp. 79-81. 20 The legislature has occasionally been asked to give the commissioners general power to fix rates, but it has always refused to' do it. The commissioners have constantly as- serted that they did not desire that power, and nothing can be more clear than that under the present law of Massa- chusetts the companies have the power to make their tariffs and to fix their own rates. There is therefore no occasion to discuss the question whether it is wise for the companies to be allowed to make their tariffs and fix the prices for the transportation they perform . But why should they not do it? Why should the owners of railroad property be deprived of the power to fix the price at which they shall part with it? The transportation which is sold by the railroad companies is private property. The capital which produces it is all private capital. This capital is all at the risk of the business. There is no guaranty by the public of any return upon it. Why, then, should the public fix the price at which the transpor- tation is to be sold to it, unless it at the same time guaran- tees that the price fixed shall produce a reasonable return upon the capital ? The state cannot fix the price at which railroad companies must obtain labor, supplies, and ma- terials for the operation of the road, or the rate of interest which they must pay upon the capital borrowed. The state cannot guarantee the amount of business to be done over the railroads, nor can it protect the companies against the risks and accidents in the operation of the railroads. Why, then, should the state assume to fix the price at which the railroad companies shall sell their transportation ? A railroad company in Massachusetts is an enterprise in which private persons invest their money for income, and that income depends upon a fluctuating margin be- 21 tween what the companies must pay out for the mainte- nance and operation of the roads, and what they can take in for the transportation which they sell. The capital is at the risk of the business. It is true this is the case with all business, for, ultimately, the value of a business depends upon a fluctuating margin between expenses and receipts. But in the case of capital invested in other en- terprises if the business is likely to prove non-remunera- tive it may be discontinued. Capital invested in ordinary business, or in manufactures, banking, insurance, or other business of a larger kind, may be withdrawn, or the busi- ness may be curtailed to meet reduced receipts. But capi- tal invested in railroads cannot be withdrawn ; their opera- tions cannot be substantially curtailed, although their receipts may fall off. It should always be remembered that the owners of rail- roads have a direct and constant interest in selling as much transportation as possible. Transportation is the most perishable of all perishable commodities. It is service which, if not performed to-day, can never be performed. It is for the interest of the owners of a railroad to work the road and its equipment to their highest capacity ; to sell as much transportation each day as they possibly can. Competition will undoubtedly at times compel them to sell some portion at cost or less ; other causes may, and often do, induce them to sell some transportation at cost or less than cost. There is no real danger that a railroad com- pany will not sell all the transportation which it can effi- ciently perform at prices which it can fairly afford to take. The creditor must have his interest upon his bonds, and the stockholder desires and should receive his dividend. The public continually desire increased accommodation and efficiency of service, and the railroad manager is under 22 constant inducement to increase the whole business of the road at reasonably profitable rates. The railroad officials are trained and experienced men. They know where a reduction of rate will produce an increase of business better than anybody else. And they also know, what should always be borne in mind, that if the reduced rate in one place or upon one class of business does not produce an increase of business and of net revenue, the deficiency must be made up by a higher rate somewhere else, or result in the reduction of net earnings or in an impair- ment of service. In considering the question of a proposed reduction of rate the first consideration is therefore whether the busi- ness to which the rate is applied is elastic, so that it will increase under the lower rate and return as much or more net revenue. It may be proper also to consider whether a rate may not be reduced upon one commodity even at the expense of reduction in revenue if thereby the business upon which another rate is levied is increased so that upon the whole the net revenue is not reduced, or is increased. It is impossible to consider the rate on one article between two points separate and apart from the rates on all other articles and between all other points upon the same rail- road, that is, apart from the entire railroad enterprise in which the capital of the company is embarked. It is impossible to "fix " rates. They are the price of transportation, and, like other prices, are controlled by supply and demand, and by countless commercial causes beyond the control of the companies, or of any one else. To fix rates requires the power to fix the conditions to which the rates are applied. These conditions are beyond the control of the companies or of the state, and are con- stantly shifting from commercial, economic, social, and _'.; political causes. The result is thai a tariff, like a system of taxation, is a growth. The conditions which affect the fixing of rates, and con- trol the making of railroad tariffs, are complicated and constantly fluctuating. The railroad officials whose pro- fession it is to adapt those rates to the business ought to be, and I believe are conceded to be, the most competent persons to make the rates. If the time shall come when they are not, then the state, instead of fixing the tariffs, should take the roads and operate them, returning to the private owners a reasonable income, or such income as they may be entitled, under their charters, to have, upon their capital invested in them. But for the legislature to attempt to fix the tariffs of all the railroads in the common- wealth, and leave the operation of the railroads in the hands of the owners, and at the same lime to secure an efficient public service, would be to attempt an impossible task. Massachusetts has wisely refrained from attempting this task. It has recognized that efficient service requires adequate public accommodation for that service. The ex- cellent condition of Massachusetts railroads, and the high character of the service they render the public, is largely due to the fact that the legislation of the commonwealth with regard to railroads has been to require better service and more ample accommodation, and not to require a less price for the service. Massachusetts has wisely left the companies to make their own tariffs, subject only to the supervision of the board on the lines laid down by it in 187 1, and constantly adhered to ever since. But this is not only the rule which has been established and followed by the commission in Massachusetts. It is also the only rule that can be followed unless the board 24 are to attempt to do that which the legislature has not re- quired them to do, and what they cannot in fact do, — that is, to revise and fix from time to ti?ne all railroad rates, on all railroad transportation, state and interstate, by all the railroads of the commonwealth. If the commissioners should be required by the legisla- ture, or should of their own motion attempt to pass upon the reasonableness of all the rates, they would find the difficulties so insuperable that they would necessarily aban- don the task. If the commissioners should attempt to reg- ulate the tariff of a single road as a whole, they would be required to fix not only freight, but passenger rates, not only state, but interstate rates. By what standard would they proceed if the existing rates, which are the result of countless commercial causes, of the law of supply and demand operating in innumer- able ways and at countless points (for the local freight tariff of the New Haven road alone contains nearly two and a half million different entries of charges), are not to be taken as reasonable, and any specific rate compared with them as the standard by which to judge whether the speci- fic rate is excessive? If this standard is not to be taken, then another standard must be found. What is it to be? It has been claimed by the petitioners that this standard is to be found in the cost of the particular service for which the rate is charged. But it is impossible to ascertain the cost of any particular service performed by a railroad company under existing conditions. It is impossible to ascertain the actual cost of transport- ing freight or passengers between two points, or to ascer- tain the actual cost of transporting all freight, or any par- ticular kind of freight, between two points on a large rail- road system, like the New York, New Haven & Hartford 25 Railroad, with any substantial accuracy, that is, with any such accuracy as to make the actual cost of the particular transaction a factor of any value in fixing the price to be charged. Independent of the practical impossibility of apportioning the fixed charges, like the salaries of general officers, taxes, interest, and other similar expenses, it is impossible to sep- arate the expense of any particular transaction, like the transportation of a particular trainload of freight or pas- sengers, or the transportation of a particular class of freight or passengers, between two points, from the trans- portation of all other freight or passengers between those points. For instance, take the case of bridges between Brockton and Fall River. How can you say how much of the cost of the maintenance, repair or renewal, or safe-guarding of each bridge is to be charged to a particular class of freight, or to a particular train that runs over a bridge? Is this expense to be charged wholly to the freight and passengers which do pass over the bridge? If so, how, in the case of local trains which leave and take passengers and freight from station to station, is the freight and pas- senger business actually passing over the bridge to be ascertained, and in what proportion is the expense to be charged to the various classes of passengers and of freight passing over the bridge? What portion is to be charged to empty cars that pass over the bridge? How is the in- come from the freight which actually passes to be ascer- tained, so that the cost may be applied to it, without ascer- taining where all the freight originated on each side of the bridge, and where it terminated on the other side? Again, the traffic over the bridge is doubtless at times greater in one direction than in the other. Are you to 26 charge the traffic proportionately, and vary the charges ac- cording to the direction in which the business is carried? Or, if expensive repairs become necessary [upon the bridge, or it requires renewal, is the cost of the repairs or of the renewal to be charged wholly to the business passing over that bridge, and the rates on that business advanced ^pro- portionately ? Take another illustration. The repair and maintenance of a large railroad vary on different portions of the road each year. There are conditions of climate, of storm, of wind, and countless vicissitudes, varying the necessity for expense in maintenance and repair upon different portions of every large road, especially in New England. Suppose it is necessary, for instance, upon the road between Fall River and Brockton, to spend in some one year twice as much as upon other portions of the road : are the rates of business upon that part of the road to be correspondingly advanced, and then when upon some other part of the road it becomes necessary to make unusual expenditures, or those beyond the average for these purposes, and less is expended upon the line from Brockton to Fall River, are the rates upon the business between those places to be re- duced? Again, trains run over the road from Brockton to Fall River not only between those points, but between many other points on either side of those points. How are you to separate the cost of maintaining bridges, tracks, switches, signals, etc., between those points for the benefit of the business between those points from the cost for the benefit of the business between all other points? Take the case of a locomotive which breaks down, ex- plodes, or is destroyed by an accident while hauling a freight train between Fall River and Brockton. To what 27 business is the cost of replacing or repairing that locomo- tive to be charged? To the freight actually behind it, being hauled by it when it was destroyed or injured? Obviously not. Is it to be charged to all the freight between those two points? If so, then the rates must be correspondingly increased, or by a single accident to a train and its crew the entire profit of that business for a single year might wholly disappear. Again, how are the expenses of station agents on a par- ticular part of the line to be apportioned to each particular kind of business which the line does? There are station agents at some stations who attend not only to the selling of tickets, but to the receiving and delivering freight, handling express, and, in some cases, to the telegraph busi- ness. How are their salaries to be apportioned between these different classes of business at the station? At one station there is a larger amount of business than at another, and yet one man cares for the business at each station. Is his pay to be apportioned so that the rates upon the larger amount of business will be less than upon the smaller amount in each case? Take another illustration. There are numerous water tanks, each maintained at an expense which could prob- ably be practically ascertained. How are you to apportion this expense? Are you to measure the water which each engine takes, and charge it to the traffic which that engine hauls? Is it possible to apportion that expense upon the particular article, or upon each particular class of freight, which the engine hauls? What are you to do in the case of side tracks? A freight train running from New Bedford to Boston is obliged to be side-tracked for some other train. That side track is main- tained for all trains, passenger and freight, through and 28 local. How can you tell what proportion of the cost of the maintenance of that track is to be charged to that train? Possibly one train may run a certain distance with- out being side-tracked, and the next train may be side- tracked twice or three times in the same distance. Are you to charge a proportionate part of the side-track ex- pense to one train and not to the others? Is it not obvious that you cannot apportion this item of cost upon any of the traffic for the benefit of which the side track is main- tained, but that it must be charged to the entire traffic of the road? Take the case of taxation. Local taxation is an import- ant item. It varies in different counties and in different states through which the railroad runs. Are you to charge the taxation in each county upon the business in that county proportionately? It is impossible. Suppose the counties of Bristol and Plymouth tax the railroad property at a lower rate, or upon a lower valuation, than the county of Norfolk : is Norfolk county business to pay more and Ply- mouth and Bristol counties business to pay less? Taxes vary in the same county from year to year, not only in rate paid, but in the valuation, which is the basis of the tax. Are the rates to be adjusted each year to meet these variations? It is obviously impracticable. Again, some locomotives are heavier than others, and, of course, cause a greater wear to the permanent way. Are you to charge the expense of the maintenance or renewal of the permanent way according to the weight of engines? Some trains run at a higher speed than others, and cause a correspondingly greater wear to the track. Is it possible to apportion the expense of maintenance upon this basis, so that the heavier and swifter locomotive and train shall 21> bear a proportionately larger part of the expense than the lighter or slower locomotive and train? What are you to do about the handling of empty cars which earn no money? What is to be done about the transportation of supplies of the company itself? Is the cost of transporting these to be separated, if practicable? Of course, if the rate to be charged for the transportation of each particular kind of business is to be based upon the cost of doing that partic- ular business, then you must ascertain the cost of transport- ing the supplies for the company and take them into ac- count, for the cost of transporting the supplies of a large railroad has a very considerable effect upon the cost of its transportation as a whole. Again, you must take into ac- count upon the question of cost the amount and the regu- larity of the traffic. It makes a great difference to a rail- road whether it is called upon to handle a thousand tons of freight a day for a hundred days, or required to handle a hundred thousand tons of freight in one day. Take a single further illustration, which is applicable in New England especially. On some portions of the line the road may be blocked during the winter by snow, traffic entirely stopped until the snow is shovelled out, while upon other portions of the line the traffic goes on. Is the expense of clearing the way to be charged to the traffic upon that portion of the line where the snow blocks and the traffic stops ; and if so, how is it to be apportioned between passengers and freight upon that line and between the different classes of freight? Are the rates to rise or fall according to the severity of the winters or the preva- lence of storms upon one portion of the line and not upon others ? Again, take the question of stations, and the abolition of 30 grade crossings for the safety and convenience of the public. Is the cost of these to be charged to the business of each locality? If the people of a town desire a new station, or the improvement of the roads in that town by the abolition of grade crossings of its public ways, are they to have this only upon the condition that the cost of it shall be charged to the business of that town? Competent experts say that there are nearly a hundred clear, actual, and distinguishable divisions of expense in the handling of the same class of freight by a locomotive of the same weight, and with the same salary paid to the train hands, upon different parts of a single railroad. Cost depends upon the grade, and curvatures of the road, the weight of locomotives and cars, expenses for accidents and fire losses, the amount and regularity in volume of freight actually carried, the salaries of the engineers and the fire- men and brakemen, compensation of station agents, of switchmen, and signal men ; repair, maintenance, or re- newal of the way, expense of water, drawbridges, side tracks, new stations, of policing the tracks, of watchmen, telegraph operators, train-despatchers, and numerous other employes. It is obviously impossible to separate and ap- portion these and other like expenses under the constantly var} T ing conditions which affect the transportation of freight and passengers. No competent man can be found who will say that the cost of transportation with reference to any particular transaction can be ascertained with any accuracy. All who have examined the subject admit that it is impossible to ascertain the cost of a single class of business so ascer- tained as to make it any guide whatever in fixing the rate to be charged for that business. As early as 1872 the Massachusetts railroad commis- 31 sioners, in discussing the question of reduction of rates upon coal, said, — " In pressing their views upon this subject on the consideration of the railroad officials the Commission- ers have frequently been met by an inquiry as to what they considered a reasonable rate per ton per mile for the carriage of coal. This question, in its general form, they are not prepared to answer; neither do they believe that a specific answer to it is possible ex- cept where every condition entering into the cost of transportation is first definitely established. Few things are more fallacious than the usual estimates made in answer to inquiries as to what it costs to move a ton of freight ; yet the answer to the question of what is a reasonable charge for moving it, necessarily de- pends upon what it costs to move it. A given railroad company may by a system of averages arrive at some general results upon this subject, deduced from its in- dividual experience, asserting that the cost is one, two three or more cents per mile. When, however, this . statement is generalized upon and made to cover the whole railroad system, creating, as it were, a standard of cost, the result is no less deceptive than it would be to argue as to the cost of raising a bushel of wheat or a barrel of potatoes from the experience of a single farm or a particular district of country. The cost of moving freights varies, under given circumstances, at least as much as the cost of raising crops. In the one case it depends upon soil, climate, cost of labor and the amount raised, with the appliances used for rais- ing it ; in the other upon the value of money, the cost of construction and operation, including wages, fuel 32 and material ; also upon the quantities seeking trans- portation, the regularity of its movement and the facil- ities for handling it." R.R. Comrs. Report, 1872, p. clxvii. In 1875 the commissioners, in their general discussion of fares and freights, dealt specifically with the question of the cost of moving freight, and referred to and reaffirmed their statements upon that subject in the report for 1872. In the same connection they referred to an investigation by Oc- tave Chanute, then consulting engineer of the Erie Rail- way Company, who, they said, had treated the subject in a spirit of more thorough and scientific inquiry than any other person. They said that, in addition to studying his paper (which is entitled "The elements of cost of railroad freight traffic," and may be found in the Transactions of the American Society of Civil Engineers, vol. 2, p. 381, 1874), they had entered into correspondence with him, and that he had expressed himself as confident that the formula for ascertaining cost could be — "reduced to six terms, which, however, would contain sixty variable quantities" They then say, as showing the immense complexity of this problem in relation to which so many and such confi- dent opinions are continually advanced, quoting at length from one of Mr. Chanute's letters, that this letter more than justifies the illustration drawn from the cost of producing crops made use of by the commissioners in their third an- nual report. R.R. Comrs. Report, 1875, P- 37* The commissioners also during that year called to their 33 assistance upon the question of cost of freight traffic the superintendents of the various roads of the commonwealth, who made a report which the commissioners published as an appendix to their annual report. This report states that about 63 per cent of the cost of operating a road arc mixed charges, part belonging to passenger and part to freight, and that the superintendents are not aware of any rule or method by which the exact per cent chargeable to each can be determined. And in conclusion they say they do not believe it possible to fix the exact cost of moving freight on the eight roads then leading out of Boston. R.R. Comrs. Report, 1875, P- 79- In 1898 the board, speaking by its chairman, Mr. San- ford, in the Brockton rate hearing said, — "We state in our report every year that the ex- penses of operation per passenger train mile and per freight train mile, respectively, cannot be stated, be- cause the operating expenses of the passenger depart- ment are not kept by the companies separately from those of the freight department. They cannot be kept. The interstate commerce commission has been fighting the railroads of the country, or did fight them for a series of years, upon that very question, and tried to have them return the operating expenses of the passenger department separate from the freight department. They could not do it, and the interstate commerce commission attempted to figure it them- selves, until finally the whole matter got into such an absurd condition it was abandoned, — every attempt to separate the expenses of operation of the passenger and freight departments." 34 And yet if the cost of any particular service, either pas- senger or freight, is to be ascertained, it is obvious that the cost of the operation of the passenger department must be separated from the cost of the operation of the freight de- partment. It cannot be done, and every attempt to do it has been abandoned as an impossibility. In 1873 the Massachusetts Railroad Commissioners, in discussing the question of passenger rates, said, — " The economical principle of payment strictly ac- cording to the distance persons are carried is obvi- ously incorrect. Distance has very little to do with the cost of transportation, or the services and use of the property of a corporation for which each traveller should pay. The immense item of fixed cost and equipment — stations costing hundreds of thousands of dollars — a road-bed and a large body of rolling stock and force of officials to be kept up, are all ex- penses incurred equally for the passenger who travels one mile or for him who travels ten. The usual ar- gument in support of the fixed charge per mile is that each traveller under such a system pays for what he receives, — no more and no less. The fact however, is just the reverse of this. Under such a system each person does nothing of the kind. He pays for transpor- tation only, — he does not pay for the use of the fixed capital, which all travellers, whether those for greater or for less distances, share the benefit of equally." R.R. Comrs. Report, 1873, pp. 42, 43. Again, they say in the same report, — "If the amounts paid by the public are intended 35 correctly to correspond to the cost of the services ren- dered by the corporations, then the distance that a person or thing is carried has very little necessary connection with the cost of carriage. ... As re- gards merchandise this is so apparent that it needs only to be stated to be understood." Id. p. 56. In this report for 1875, which contains a very full discussion of the question of regulating fares and freights by law or by commissioners, they say, — "The rule of uniform mileage rate is also wholly opposed to the fundamental principle of taxation, that the burden should in all cases be so imposed as to rest most heavily where it will be least felt." Id. p. 59. And in conclusion they state as a final objection to the making of rates by the legislature or commissions that — "The essence of the system is that certain persons, whether the legislature itself, or officials designated by the legislature have devolved upon them the re- sponsibility of establishing the revenue of property belonging to others. The Commissioners have grave doubts as to the success of any effort at the regulation of the railroad system which practically effects a sepa- ration between the ownership of a railroad and its management" Id. p. 63. In their annual report in 1890 the Interstate Commerce 36 Commission, speaking of the making of railroad rates, said, — "A rule that should measure charges by cost would work an entire revolution in the business of transpor- tation. . . . Nothing more disastrous to the com- merce of the country could possibly happen than to require the rating for railroad transportation to be fixed by this one rule. But the consequences would be similar if any other single test of a carrier's charges were to be applied ; and if any two or three combined were made use of, the probability of injury to the country and of disaster to the roads would be only a little farther removed. . . . Rates are never meas- ured exclusively by the weight of the articles carried, or by bulk, or by the cost to the carrier of transport- ing them, or by the value to the owner in having them transported. And if all of these and other con- siderations bearing upon the subject are taken into account in the determination of rates as they habitually are, there is no rule by -which it can be determined how much importance should be attached to any one or any combination of them ." Fourth Annual Report, Interstate Commerce Com., pp. 14, 15. Albert Fink, one of the most accomplished railroad men of the United States, declared that — "The expenditures which are entirely independent of the amount of work performed by the railroad, form so large a proportion of the total operating expenses of railroads that it becomes impossible to make the 37 amount of work performed a criterion or measure of the cost." "Cost of Railroad Transportation," etc. (1874), P- 3- Again, he said that — "A tariff established strictly upon the basis of cost would be of little use unless it be accompanied by a law forcing the people to ship over the road a certain quantity of freight at the established rates." Id. p. 18. Again, in 1880, he said, — "To make even an approximate estimate of the cost in any given case is a work of great difficulty and complexity, and strictly to comply with a condition that a railroad tariff in order to be reasonable must be based upon the actual cost, and must be made in exact proportion to cost, is an impossibility." "The Railroad Problem and its Solution," p. 5. Again, in 1883, he said, — " If each service should be paid according to its cost, it would be a most delightful way for railroad companies to manage their railroads. . . . But the effect of that tariff would be that most of the import- ant articles now carried over the railroads could not be carried at all. . . . The principle that railroad charges should be based on the value of service rather than on the cost is, I think, the correct one. . . . That is the principle that is followed, not only here, 38 but in every other country. Any other principle, if adopted, would be simply ruin to the best interests of the country. You could not develop a country under it. This principle of charging according to the value of the service rendered is adopted in all countries. . . . The attempt to show that the railroads are wrong in adjusting their tariffs according to the value of the service rendered is based upon the grossest ignorance of the correct principles upon which trans- portation charges should be made." Testimony of Albert Fink, before the United States Senate Committee on Labor and Edu- cation, September 17, 1883, p. 61. For further views of Mr. Fink on this subject, see his argument before the Select Committee of Interstate Com- merce before the United States Senate, May 21, 1885. Grierson, the standard authority on English and foreign railway rates, says that — "one favorite proposal, often refuted but constantly renewed, is to base rates on the actual cost of con- veyance plus a reasonable return on the capital in- vested. But it is no light presumption against this principle that though so often proposed, especially by theorists, nowhere has it been carried out." He says further that — "such a principle is not only inconsistent with any kind of classification, but it may be confidently stated that no trustworthy data as to the cost of conveying each consignment or each class of goods in the actual intricacy of business could be obtained. ... So 39 serious are the difficulties in the way of ascertaining facts as to the cost of transport, so varied are the cir- cumstances in this country, that it is not surprising that in every instance in which the principle has been brought before a parliamentary committee or royal commission, it is met with the condemnation expressed by the Select Committee of 1872, — 'It is impracti- cable.'" " Railway Rates, English and Foreign," pp. 8, 10. Mr. Grierson states the real basis of rates to be — "the requirements of trade, or according to a popular expression, what the traffic will bear." He says, — " It is easy to misrepresent this principle. The com- monest misrepresentation is to assume that it means charging what the traffic will not bear. Rightly understood this is the only fair working principle ; the only scientific rule, if that phrase has any clear mean- ing. This is only another way of saying that rates should be so fixed as to enable the manufacturer or trader and the railway company to obtain a reason- able profit, and that rates should ultimately be deter- mined by the law of 'supply and demand''' He compares the making of a tariff to the adjustment of taxes, saying that — " What an article will bear — in other words, what the owner can with convenience pay — is a rule alike applicable to taxation and railway rates." Id. pp. 68, 71. 40 The English Parliamentary Committee on Railway Amalgamation made a very thorough investigation of the question of railroad tariffs, and in their report declared that M // is impracticable to establish any standard for the revision of rates and fares founded on cost and profit.'''' Rept. Pari. Com. on Railway Amalgamation, 1872, p. 51.* Speaking on the same subject, a high English authority on railway rates says that it is impossible to fix a maximum rate, because "the circumstances that determine the cost of carrying goods and influence the remuneration of the car- rier are so varied and complicated that it is impossible to avoid making the maximum toll too high or too low, or indeed, both too high and too low at the same time." Hunter, "Railway Rates" (1889), p. 19. The "cheap trains" act of 1844, tne ^ rst parliamentary regulation of rates in England, provided that if after twenty-one years the profits exceeded 10 per cent the schedule of maximum charges might be revised by the Treasurer, but provided that after such revision no further revision should be made for twenty-one years, and also that the revision should be accompanied by a state guaran- tee of 10 per cent so long as the provision was in force. 7-8 Victoria, c. 85. * For the history of the action in England as to state regulation of rail- way fares and freights, see — Butter-worth, "Railway Rates and Traffic," 1889. A full statement and history of the legislation and action in respect to English railway rates will also be found in an article by James Mavor, in the Quarterly Journal of Economics, April and May, 1894, pp. 284, 415. 41 Charles Francis Adams, in tracing the attempt to regu- late railway rates in England, states concisely the result of the elaborate investigation by the Parliamentary Committee on Railroad Amalgamation in 1872, calling special atten- tion to their conclusion that periodical revisions of all rates and tares by government agents was -practically impossible for want of a standard of revision. "The Railroad Problem," p. 90. Professor F. W. Taussig, in his paper, "A Contribution to the Theory of Railway Rates," says that by far the largest part of the cost of performing railway service is joint cost, and declares that it is impossible to apportion railway expense to any particular part of the service per- formed. He cites the experiment in Germany, where an endeavor has been made to base the tariff upon car space, and says, "The failure of this supplies the latest illustra- tion of the impossibility of fixing rates on the basis of the cost of the particular items of traffic." " Quarterly Journal of Economics," vol. 5, p. 448. Professor Taussig says that — " it is a safe conclusion that an element of joint cost appears in almost every item of a railroad's outgo, and that the proportion of expense which can be specifi- cally assigned to any one consignment of freight or any one batch of passengers is an insignificant fraction of the whole. From this fact of preponderating joint cost it follows that railroad rates are permanently af- fected by demand, and that they cannot be based on any analysis of cost of service" 42 Report of Proceedings of the American Eco- nomic Association, December, 1890, p. 53. In the debate upon Professor Taussig's paper, H. C. Adams, statistician of the Interstate Commerce Commission approved this conclusion, saying that "to say that it is ^pos- sible to assign cost to a particular traffic is an absurdity." Id. p. 55. Professor Dixon, professor of political economy in the University of Michigan, declares that "little can be said in favor of the cost of service theory. . . . To attempt to fix a rate on a particular commodity in conformity with the entire cost of handling that commodity is plainly im- possible." Dixon, " State Railroad Control " (1896), p. 76. H. T. Newcomb, chief of the section of freight rates in the division of statistics of the United States Department of Agriculture, testifying before the industrial commission in March, 1899, said, — " Rates of transportation are unjust or just in com- parison with other charges. There is no such thing as a rate which is excessive in itself. The only study of railway charges must be a comparative study ; the relations among charges on similar products and of particular charges to the total earnings of the railway itself. . . . Each of our railways has a great complex of articles that make up its traffic. You must study the rates comparatively. You cannot study them alone. There is no such thing as a rate that alone is excessive." Report of Industrial Commission (1900), vol. iv. p. 99. 43 Mr. A. B. Stickney, president of the Chicago & Great Western Railway Company, author of an excellent work on railroads, testifying before the same commission said that — " the rates never were based on the cost of carriage, and never can be; neither on the particular cost nor on the average cost." Id. p. 461. Mr. Stickney says, — " // can be positively stated that there is no means of ascertaining the cost of transporting any particu- lar shipment of property or persons" A. B. Stickney, "The Railway Problem" (1891), p. 55. Professor Sax, author of the standard German treatise, Die Eisenbahnen, says that three fourths of all railroad ex- penses are joint cost incurred for all traffic. Kirkman says that three fifths of all operating expenses are joint for passengers and freight. "Railway Accounts," vol. i. p. 305. Professor Cohn, the celebrated German political econo- mist, says that the true basis for railway rates is what the traffic will bear, what the persons who .are called upon to pay can afford to pay for what they receive. He says a railway rate is precisely like a government tax, and should be imposed according to the ability to pay it. He says this makes it imperative that the roads be owned or the rates fixed by the government. "Die Englische Eisenbahnpolitic, pp. 64, 65." 44 Mr. W. D. Dabney, discussing the rate question, says, — "The question of what rate on any particular com- modity, or charge for any particular service is extor- tionate, or what is reasonable, must evidently be a relative one. It would manifestly be impossible to predicate of the charge for any particular service that it is unreasonable or the reverse without a close exam- ination of the entire traffic and field of operations of the road. It would be necessary to consider not only the value of the property and its physical characteris- tics, but the quantity and the different kinds of traffic transported by it, its situation with reference to com- petitive routes, both generally and at special points, and in general, all the complicated conditions which influence railroad rate-makers in fixing charges." "The Public Regulation of Railways," pp. 97, 98. Again, Mr. Dabney, in speaking of classification, says it is " not based solely or principally on cost of service and risk." Id. p. 163. See also the discussion of the proposition that because the railroads carry through business at a very low rate they are assumed to be able to carry local business at equally low rates, which Mr. Dabney says is the "under- lying fallacy " of Mr. Hudson's work, " The Railways and the Republic." Id. pp. 121 et seq. Mr. J. Shirley Eaton, the accomplished statistician of the Lehigh Valley Railroad, has just published a volume of 45 over three hundred pages, in which, among other things, he attempts to re-establish the long since exploded theory that the charge for railroad service can be based upon its cost. This book, however, is, I think, itself the best evi- dence of the impossibility of ascertaining the cost so as to make it a practical basis of rates. Indeed, Mr. Eaton, at the end of an elaborate "formula for getting at the cost of freight per ton mile," covering four closely printed pages of tables and figures, frankly says, — " It is very elaborately and carefully worked out, for it is intended to be a guide in rate making. But let us only disturb operating conditions by a larger car or a heavier train, or let us get on one side or the other of the balance of traffic movement, or let the balance of movement be disturbed, or the relative proportion of our various grades of traffic be disturbed by general commercial causes outside of control, or let us deliberately set up a lot of causes by changing the rates and our house of cards falls to the ground. "And further, who will defend the reasoning by which the undistributed expenses are apportioned to passenger and freight service on the basis of train miles? "Assuming that these formulae that we have gotten are exact, they are measures of past conditions. But for the future they are valuable only so far as those conditions exactly repeat themselves or continue in their original proportion. The traffic man, even more than the operating man, is dealing with highly elastic conditions. He is dealing with an organic thing that may expand and grow or contract and wither. 46 "The very thing which most largely determines the cost per unit, which is the rate, is thus held as rigidly to a formula evolved out of other and -past conditions as some Chinese mandarin." "Railroad Operations," Eaton, p. 278. In the report of "The Hepburn Committee," page 14, they say, — "Your committee made an earnest effort to ascertain the cost of transportation and the relation of the cost of through and local traffic. The best information that we could obtain does not enable us to suggest the enactment of any fixed ratio between State and extra State points, neither are we able to suggest the enact- ment of any fixed ratio between different points within this State. A thorough consideration of all the evi- dence adduced upon this subject and of the subject itself, induces the conviction that the passage of what is popularly termed a -pro rata freight law would be prejudicial to the interests of the public. The experi- ence of Western States in this direction ought to be a warning and a satisfactory reason for declining to bring this subject into the field of legislation in this State. While there are certain general propositions that may with propriety be laid down by the legisla- ture for the control of traffic managers in the adjust- ment of rates, within those general rules there must be permitted an elasticity of management and freedom to exercise judgment and discretion upon the ever varying questions that constantly present themselves for action." 17 Again they say, — "The business of transportation requires the great- est freedom of management of any business extant. This is manifest to the most casual observer." N.Y. Leg. Doc. No. 38, 1880. Even Mr. Hudson, with all his prejudice against the railroads, said that — "No legislative body can frame a tariff of rates without inequality and injustice. . . . The varying conditions that may influence rates are innumerable. It is a hopeless task to adjust the schedules to suit all circumstances, and it is futile to expect an adequate reform of railroad abuses by such means. The use- lessness of attempts to establish equitable rates by law appears in the fact that every such schedule which has been in existence ten years is now obsolete, being far above the rate now fixed by the railroads. This progressive reduction of the cost for transportation has been cited as showing that all regulation of railways is unnecessary. It is far from proving this, but it does -prove that attempts to prescribe rates by law are unnecessary and futile. The laws of trade can bring about whatever cheapening of the cost of trans- portation competition and economy will produce." "The Railways and the Republic," J. F. Hud- son (1886), pp. 329, 330. Professor Hadley says, — "There was never a more mistaken idea than the idea that rates would be reduced if thev were based 48 upon the cost of service. The principle keeps rates up. If it is strictly applied it makes it necessary that each item of business should pay its share of the fixed charges. A great deal of business, which would pay much less than its share of the fixed charges (though still giving a slight profit above train and station charges) is thus lost. This is bad for the railroads, bad for the shipper and bad for the prospect of low average rates." Hadley, "Railroad Transportation" (1885), p. 250. Professor Seligman, in an elaborate discussion of rail- way tariffs, says that — "the cost of service principle is neither practiced nor practicable. The attempt to base rates solely on cost is a pure chimera. Well-nigh every expert, whether scientist, official or legislator, and every practical commission, from the early English to the late Italian and American, absolutely discards it as a practice." Again he says that — "Actual rates are mainly fixed, not by cost of ser- vice, but by what the service is worth. Classification depends only in a subordinate degree upon cost. The controlling element is value, not cost." " Railway Tariffs, and the Interstate Commerce Law," by Edwin R. A. Seligman, Political Science Quarterly, vol. ii. Nos. 2,3. [Re- print by Ginn & Company (1896), pages 7, 10.] 49 The Cullom Congressional Committee, after a most elab- orate investigation into the subject of railway tariffs, de- clared in its report that — " The movement of a commodity by rail is deter- mined by considerations wholly independent of and not affected by the cost of the service to be -per- formed" Cullom Committee Report, p. 184. Mr. E. P. Alexander, in an article published in 1892, upon the long- and short-haul rule, says that — " railroad services must be sold rather by what they are worth than by what they cost. In fact, that is the general rule for all personal services the world over. To begin with it would be as impossible to divide out their varied expenses for management, wear and tear, accidents, and the innumerable varieties of traffic, and assign a cost to each one, as it would be for a doctor to estimate what it costs him to prescribe for each sep- arate disease to which his patients are liable." Id. p. 199. For a discussion of railway rates from the granger standpoint, see the "Railroad Question," by William Lar- rabee, late governor of Iowa, published in 1893. The author of this book frankly admits that it was written at such odd hours as he could snatch from his time, which was largely occupied with other business, and it is through- out hostile to railroads, but Mr. Larrabee declares that railroads will not serve their real purpose until they become in fact " highways to be controlled by the government as thoroughly and effectually as the common road or turn- 50 pike, and the ferry, or the postoffice and the custom- house." In other words, he is forced to concede that the making of tariffs by the state would necessarily result, and ought to result, in the ownership, or at least the entire management, of the railroads themselves. Professor Henry C. Adams, statistician of the Interstate Commerce Commission, in a paper read at the National Convention of Railroad Commissioners in 1893, says that the rule that specific railway rates should be determined by specific cost of service is wholly untenable, and that the practice of charging "what the traffic will bear," as applied by railroad managers, appears to be incapable of defence. That the principles that lie at the basis of just railway schedules arise from a study of the theory of taxation, and that — " as in taxation payment for the support of govern- ment should be in proportion to the ability of citizens, so the contributions of shippers to the fund necessary to meet the legitimate demands of railways should be made from various classes of goods in proportion to their ability to bear the charges." He then says that — "railway commissioners do not have at their command the range of facts which are the common property of railway managers. How, then, is it possible for com- missioners to exercise a controlling voice in railway management, or indeed to decide justly and wisely on such questions as are presented to them. . . . The question involved is not simply commercial in charac- ter, it is at the same time a question of public policy, and as such, like all questions of a political character, 51 demands the fullest and completest knowledge respect- ing it." Id. pp. 134, 135. For a discussion of the result of railway regulation in England, see a paper by W. M. Acworth, published in 1893, entitled "Government Interference in English Rail- way Management." Mr. Acworth says that "government interference with freight rates has resulted in failure and disappointment." Id. p. 276. The Interstate Commerce Commission have approved the general principle that owners of railroads should be left free to construct, to own, and to manage the railroads. They have said, — " It is freely conceded that many practices of the carriers, and many of the principles adopted by them in the way of tariffs and classifications, which seem at the first blush to be purely arbitrary and unjust are found on examination to be perfectly just and founded on the strongest reasons of public expediency and commercial necessity. It is, indeed, almost wonder- ful, considering the arbitrary powers which the car- riers (so far as mere common law restraints are con- cerned) possess in the matter of rate-making, that the actual exercise of arbitrary and oppressive action is so comparatively rare. The explanation is that while the restraints of the common law count for little or nothing, the operation of economic and coimnercial principles is constantly exerting a pressure which 52 cannot be resisted in the actual as well as the rela- tive adjustment of tariff charges." Suggestions of the Interstate Commerce Com- mission on Senate Bill 892, March 16, 1892. Mr. Aldace F. Walker, former member of the Interstate Commerce Commission, in his paper "Amendment of the Interstate Commerce Law," says, — " Experience in this and in many other countries has shown the impossibility of establishing transpor- tation charges by rule of thumb, or by any kind of procrustean rule. Natural conditions have uniformly proved too strong for such laws to overcome ; and when those forces have produced a scale of rates as phenomenally low as that which the American pub- lic quite generally enjoys, the policy of attempting to introduce a new authority may be, and is, very seri- ously challenged. " But if Congress is of opinion that it is to go into the business of making railway rates, it should face the question deliberately, and confer the power in set terms, leaving nothing to implication, either as to the extent of authority intended, or as to the methods of its use. The rules for deciding what shall be a 'reasonable rate ' should be fixed in the law ; it should afford to the carriers who may feel their just revenues imperiled, the protection to which they are constitu- tionally entitled, by establishing a right of appeal to the courts, which does not now exist. It should in- clude the rates of all common carriers, especially of carriers by water. It should also confer upon what- ever body may be deemed the trustworthy recipient 53 of the rate-making power an authority to raise rates as well as to lower them ; there is as much public danger in rates too low as in rates too high ; and the cases are frequent in which the desired relative ad- justment can be better reached by advances than by reductions in tariffs." Id. p. 118. Mr. Kirkman, in a paper read at the World's Railroad Commerce Congress in 1893, says that — " the low railway rates of America, and its great com- mercial prosperity, the result of government absten- tion, teach the lesson that the less such properties are interfered with by governments the better. . . . The dream of governmental regulations of railroads is a return to the practices of medieval times, when governments fixed the price of bread and meat. Loss of confidence, falling off in production and enhance- ment of prices, and general hardships, that followed then, will follow to-day from a like cause." " Addresses before the World's Railway Com- merce Congress," p. 81. The English parliamentary commissioners, after years of practice under extended powers, stated to Parliament, in their amalgamated report, — " This is a function no government ought to under- take. It involves the necessity of determining what are the proper expenses of the companies, and what economies they can practice. These are matters which require the knowledge and skill and experi- ence of the managers themselves, and any attempt 54 on the part of any government department to do it for them is impossible, unless the government is to undertake an account of interference with the internal concerns of the company, which is neither desirable nor practicable." The railway commissioners for the state of Maine re- ported in 1874 as foll° ws : — " In the minds of those who give this subject the fairest consideration, and possess knowledge enough of it to appreciate fully its difficulties, it becomes a conviction more positive, the longer it is dwelt upon, that the only sure way to obtain permanently low rates on railroad traffic and especially on freight, is to leave the problem untrammeled by legislative enact- ments to those -whose special business it is to study out its intricacies.'" Mr. Schoonmaker, formerly member of the Interstate Commerce Commission, in an interesting article upon the unity of railways and railway interests, says, — "There can be no independent rates upon any road which is part of the general railway system, and inasmuch as there is no road which is not part of the system, all roads are related and dependent and must substantially conform to one another." Further, he says that — " considering that railways and their business are so unified both within state lines and interstate, there cannot be just, uniform and efficient regulation except under one authority, and that must necessarily be the federal authority. As has been often said, the busi- 55 ness of a railway, whether within a state or ink-i stair, is so blended and mingled, both in respect to the traffic and the agencies by which it is carried, that separation for purposes of regulation , or even taxa- tion^ is impracticable" " Compendium of Transportation Theories, Ken- sington Series," First Book, pp. 60, 64. In his paper, "The Railroads as one System," Mr. Joseph Nimmo, Jr., discusses the causes which regulate railway rates, and the limitations of government control, and says, among other things, that — "there is no popular fallacy more misleading than the assumption that the railroad managers of the country exercise a very wide range of discretion in the matter of rate-making." Id. p. 74. Mr. Hendrick, in his excellent book upon " Railway Control by Commissions," reviews at length the action of the Massachusetts commission, and says that in no state in the Union has there been less friction between the rail- ways and the public, or, on the whole, more satisfactory service by the railroads, and that, if the success of the commission can be attributed to any one thing, it is to the fact that the commission has absolutely no arbitrary power. He calls attention to what is, I think, little understood, and that is that the fixing of rates by the state will lead ulti- mately to taking from the states the power to fix rates at all. If the states fix rates on state traffic, then some power must fix rates on interstate traffic, and that can only be the federal government. And as the interstate traffic is 56 the larger part of all the traffic, and is carried on in con- nection with the state traffic, the necessary result will be the fixing of all rates by the federal government. "Railway Control by Commissioners," Frank Hendrick (1900), pp. 134, 135. * The United States Supreme Court has said that the power to fix rates "is a legislative and not an administrative or judicial function, and is a power of supreme delicacy and im- portance. . . . The grant of such a power is never to be implied. The power itself is so vast and com- prehensive, so largely affecting the rights of carrier and shipper as well as indirectly of commercial trans- actions, that no just rule of construction would toler- ate a grant of such power by mere implication." Interstate Commerce Commission v. Cincin- nati &c. Ry., 167 U.S. Reports, 479, 494, 5054 But the legislative power to fix rates has not been given to the commissioners in Massachusetts, and it necessarily * For a practical discussion of the difficulty in properly fixing rates and the proper method of making railroad tariffs, see "American Rail- roads as Investments," by Van Oss (1893), pp. 82 et seq. Professor Le Rossignol in his recent work says, — " It has come to pass that there is a classification of freight based on value and not on weight, and the rates are based not on the cost of service but on what the traffic will bear. That this is a correct principle in theory can hardly be doubted.' 1 '' "Monopolies, Past and Present" (1901), p. 164. t A full statement of the statutes of the various states as to fixing or supervising railroad rates will be found in the opinion in this case. 57 follows that their power to pass upon the reasonableness of a particular rate is only a power to compare that rate with other existing rates. To say that a rate is reasonable or unreasonable without reference to other rates for similar services, as, for instance, upon the basis of cost or of value of the particular service, is to make a rate for that service. The answer to the claim that the commission can con- sider the cost or value of a particular service and say what is a proper rate for that service upon that basis, is that to do this would be to make rates. To say that the commission may fix a charge for one service upon the basis of the cost or value of that service alone is to say that it may fix the charge for all services upon the same basis. Indeed, if the commission should assume to thus make a rate for one service, it would be its duty, when requested, to make rates for all other services in the same manner, and it would thus find itself making the entire tariff. 1 submit, therefore, with entire confidence, that even if the cost or value of a service could be ascertained, the commissioners could not, under the provisions of the statute, decide that the charge for the service was reasonable or unreasonable upon that basis. In conclusion, I beg to suggest that this case must of necessity rest upon a comparison of the rate with other ex- isting rates. The application is in behalf of the stations in Brockton only, but no reason is given by the petitioners why, if a reduction is proper in the rate to Brockton, a similar re- duction should not be made to all the places in the Brock- ton group. Coal rates to all these places have been uni- form for many years, and the existing rate was fixed for 58 them all in 1899. The petitioners then said, and they now admit, that if a reduction is made in the Brockton rate it must also be made in the rate to all points in the group. Testimony of E. C. Packard, pp. 356, 357. Such a reduction as is asked for Brockton would, upon the present tonnage of the Brockton group, amount to a reduction of $40,104.25 in gross revenue each twelve months. This would be the reduction from the present rates applied to the -present tonnage, but it would be a re- duction from the revenue upon the same tonnage at the rate which existed until 1897 of $80,208.50. A similar reduction from the present coal rates of the whole New Haven road would amount to $877,688.31 a year. A similar reduction from the present freight rates on all the freight business of the road would amount to $6,721,- 384.45 a year, or $2,400,306.45 more than the yearly dividend upon the entire capital of the company. During the last four years a reduction has been made in the coal rates to the Brockton group, which, if applied to the entire coal business of the company, would have made a reduction in annual revenue of $658,266.21. A similar reduction in all the freight rates of the road would have made a reduction in annual revenue of $5,041,- 188.34, or $800,010.34 more than the annual dividend. If the reduction which has been made, and the reduc- tion which is now asked in the Brockton coal rate had been made, and were to be made in the coal rates of the whole road, the reduction in annual revenue would be $1,316,532.46, ;,!» A similar reduction upon all the freight business of the company would amount to $1 0,082 ,376. 68 or $j,8ji,- 00S.6S more than the annual dividend, and $1 ,j 74,840.80 more than the dividend and the rentals of all the leased lines. It is obvious that no such general reduction in rates can be made. The petitioners' claim for a reduction in rate therefore necessarily rests upon the claim that the coal rate of the Brockton group is largely in excess of other rates for similar service. With this discussion as to the standard by which the rate which is complained of as excessive and the rate which you are asked to recommend as reasonable are to be judged, we come next to the consideration of the state of affairs to which the complaint applies. It is briefly this : For many years before 1897 the city of Brockton (in- cluding the three stations of Brockton, Campello, and Montello), and about thirty other places in that part of the state, had a uniform rate for the transportation of coal from Fall River, New Bedford, and Providence, that is, from the tide-water points from which they obtained coal, of $1 a ton. These places were known, and may be con- veniently referred to in this discussion, as the "Brockton group." No complaint had been made of the dollar rate up to the latter part of 1897. Apparently no injury had been suf- fered, by Brockton at least, from that rate, because during the time that it existed Brockton had increased both in population and in valuation more than twice as fast as Plymouth county taken as a whole, and more than twice as fast as the entire commonwealth. Its railroad service had also during the same time correspondingly increased, and no complaint had been made, or is now made, in re- 60 spect to that service. Brockton has now fourteen express passenger trains and thirty-six local trains daily between Brockton and Boston, and it has thirty-two passenger trains daily between Brockton and points south. There are also six freight trains between Brockton and Boston, six between Brockton and Middleborough, four between Brockton and Cape Cod, two between Brockton and Fall River and New York, and two between Brockton and Washington and the West via Harlem River each day. I think it may fairly be said that no place in the state of the same size has more ample and efficient railroad service than Brockton. Large expenses have been incurred by the railroad com- pany for the accommodation of the Brockton business. Be- tween 1894 and 1898 $2,214,411.53 were expended in the abolition of grade crossings in Brockton upon the peti- tion of the city authorities. Of this the railroad company paid $1,439,367.50, and it also expended considerable sums for land and other railroad accommodations in Brockton, making its total expenditure in that city during those four or five years probably over a million and a half of dollars. In addition to this, Brockton, in common with the other points on the Old Colony system in southeastern Massa- chusetts, has received since January, 1894, the benefit of the abolition of what was known as the Old Colony arbi- trary, that is, the local Old Colony rate, which was added to the through rates before the lease to the New Haven. The benefit of this appears from the fact that during the year ending September 30, 1898, 9236 tons of freight to Brockton, Montello, and Campello were carried at the Boston rate for $11,117 ^ ess tnan they would have been carried under conditions existing before the lease, that is, (51 when the Old Colony local rate or arbitrary was added to the through rate. See Report of 1899 Hearing, p. 212. Brockton itself has also another special advantage in its freight business, arising from a special or " commodity " rate, which has been made for the peculiar products of Brockton, that is, boots, shoes, leather, shoe findings, etc. These products are, under the official classification, rated as first class at eleven cents per hundred pounds. Under the special or commodity tariff given to them for Brock- ton they are rated at seven cents. The advantage of this to Brockton is very great, because a large part of their business is done under this special rate. It appeared at the hearing in 1899 that the percentage of freight done under this special rate was 37 per cent of the whole Brock- ton business. Report of 1899 Hearing, p. 214. The following table of tonnage and classification for April and October, 1900, being two months, which I be- lieve may fairly be taken to indicate the general charac- ter of the Brockton business, shows that 43 per cent of the entire Brockton business done under class rates is now done under the special seven-cent rate instead of under the eleven-cent rate of the first class of the official classifi- cation : — 02 Statement of Tonnage and Classification Done Under Class Rates Between Boston and Mon- tello, Brockton, Campello, for the Months of April and October, 1900, in tons. Higher than Class 1 1 2 3 4 5 6 Special Total Rate IIC. 9c. 8c. 6c. 5c 4 c. 7c. Tons 170 960 671 1029 1 805 1573 1093 5480 12,781 Prop'n Each Class 1% 8% 5% 8% H% 12% 9% 43% 100% The effect of this special class rate enables Brockton man- ufacturers, instead of billing from the South and West by a through bill under the official classification, or otherwise, to use the low special rate of seven cents upon a large part of their business, and send their products between Brockton and Boston, and thus avail themselves of competitive rates between Boston and all points to the South and West. In other words, the giving this special rate to Brockton for its peculiar products, amounting to over 40 per cent of its entire business, enables Brockton to use from Boston lines in competition with the New Haven and its connections to all points. The result is that the New Haven, instead of getting the long haul over its own line for those products, gets only the short haul of twenty miles at the low special rate, and Brockton is thus made a competitive point at the expense of the New Haven for a large part of the Brock- ton business. In the latter part of 1897 application was made by sub- stantially the same petitioners who are now before the board to the company, and informally to the board of rail- road commissioners, for a reduction of the dollar rate to Brockton on coal. None of the other places in the Brock- ton group called for such reduction. «3 February i, 1898, the coal rate was reduced from one dollar to eighty-five cents a ton for all places in the Brock- ton group. March 21, 1898, a petitiorf was filed by James J. Dowd, E. B. Mellen, and three others, as a sub-committee, on behalf of the board of trade, the city government, and the Commercial Club of Brockton, asking the board to recommend a reduction in the coal rate and in the Ideal freight tariff. May 12, 1898, upon suggestion of the board, I think, the petitioners specified their request, and asked that the coal rate be reduced from eighty-five cents to fifty cents a ton, the first-class rate from eleven cents a hundred pounds to eight cents, and the second-class rate from nine cents to seven cents a hundred pounds. June 8, 1898, a hearing upon this application was opened before the board of railroad commissioners. This hearing continued at various times until February 16, 1899, when, as the result of negotiations between the counsel for the railroad company and the petitioners, the coal rate was reduced to seventy-five cents a ton, and the further prose- cution of the petition was abandoned. The result was stated to the board by Mr. Dowd as follows : — * Mr. Chairman : The matter of freight rates on the New York, New Haven & Hartford Railroad from Brockton has been amicably arranged between Col. Benton and myself, and it will not be necessary to have any further hearings before this Commission. Mr. Benton has consented to modify the rates as charged to the satisfaction of the Brockton people and we feel grateful to the Commission for the attention that they have given us, and I think that perhaps a 64 little gratitude is due to Mr. Benton and myself for the fact that we have relieved the Commission from a very arduous duty of striving to fix a rate, but we felt that if the matter went to the Commission they would do the best they could for Brockton and I think Mr. Ben- ton's idea was that the Commission might possibly see something in the evidence we presented and he wisely and generously gave us substantially what we ask, with regard particularly to the coal rate. "The other matters were left open for the time be- ing, with no promise or qualifications made whatever, and Mr. Benton went further and said in time to come if he knew that the company could do better on the coal rate they would do so. The rate which they give us is seventy-five cents a ton from the different points, with the possibility that in the course of the year that might be reduced still lower ; so that we are compar- atively satisfied for the time being ; it makes quite a difference. And then again it necessitates the appli- cation of that rate to the thirty-two towns included with Brockton, which after all makes quite an imme- diate loss to the railroad company ; and while we wanted a better rate than that, still we appreciated the fact that the company possibly could not afford to lose any more than that on one commodity." The stenographic report of the hearing at that time cov- ered 313 typewritten pages, and is, by agreement in this case, before you for examination. The claim of the petitioners at that time was, as is usual in these cases, that the reduction in rate would produce an increase in business so that the company would receive as much revenue and profit at the lower rate as at the higher. 65 The petitioners then said, as they ordinarily say in these cases, " We do not ask that the revenues of the company be reduced, but we believe that the lower rate for which we ask will produce at least as much, and probably more revenue than the higher rate." This claim requires examination, for the first question, in considering a reduction of rates, is obviously whether the business to which the rate applies is such that it will re- spond to a decreased rate with an increased volume of business. For this purpose a table has been carefully prepared, which is found at page 255 of the stenographic report, showing the tonnage and revenue to each point in the Brockton group, for seven years, from February 1, 1894, to February 1, 1901. This period includes four years at the dollar rate, one year at the 85-cent rate, and two at the 75-cent rate. From this table it appears that during the year from February 1, 1897, to February 1, 1898, the coal tonnage to the Brockton group was 128,929 gross tons, and the revenue $128,929. During the following year, ending February 1, 1899, the tonnage was 141,407 gross tons, being an increase of 12,478 tons, or 9.67 per cent, but the rate was 85 cents a ton, so that the revenue, instead of being $141,407, was $120,195.95, being a decrease of $8733.05, or 6.77 per cent of the entire revenue ; that is to say, during this year the railroad company carried 12,478 tons more than dur- ing the previous year for $8733.05 less compensation. During the following year, from February 9, 1899, to February 1, 1900, the total tonnage was 162,355 gross tons, being an increase of 20,948 tons, or 14.82 per cent. But this tonnage was carried at 75 cents a ton, and al- though the increase of tonnage was 20,948 tons, or 14.82 66 per cent, the revenue at the 75-cent rate only increased $1570.30, or 1. 31 per cent. And the amount received for the carriage of the 162,555 tons in 1899 at the 75-cent rate was $ j 162. j 5 less than the amount received for carrying the 128,926 tons in 1897. The net result was that in 1899 the company carried 33^426 tons, or 25.92 per cent more tonnage than it did in 1897, two years previously, for $7162.73, or 5.55 per cent, less revenue. It is obvious, however, that the full effect of the 75-cent rate, or the reduction from $1 to 75 cents could not be ascer- tained by the result of a single year's business, and there- fore I have made the comparison for the year from Febru- ary 1, 1900, to February 1, 1901. During that year the total tonnage to the Brockton group decreased from 162,- 355 g ross tons t0 160,417 tons, a decrease of 1938 tons, or between 1 and 2 per cent, and the revenue decreased from $121,766.25 in the previous year to $120,312.75, a decrease of $1453-50, and a" decrease from the revenue in 1897 of $8616.25. The net result, then, for the last year has been that the company carried 51,488 gross tons more than it did in 1897, for $8616.25 less revenue. If, therefore, we assume that all increase of tonnage since 1897 has been the result of the successive reductions in rate, we find that the company is still, although carrying a larger tonnage, receiving a much less revenue. But has the increase in tonnage resulted from the reduc- tion of rates? To ascertain this we properly look to see whether the tonnage increased when the rate was uniform, and we find that the tonnage increased and decreased under the uniform dollar rate substantially as it did under the suc- cessively reduced rates of 85 cents and 75 cents. 67 From February, 1894, to February 1, 1895, the coal ton- nage of the Brockton group under the dollar rate was 120,470 gross tons. In the next year, from February 1, 1895, to February 1, 1896, the coal tonnage of the Brockton group had in- creased to 142,954 tons, under the same rate of a dollar. But in the next year, from February 1, 1896, to Febru- ary 1, 1897, the tonnage decreased under the same rate to 125,130 tons, which, although less than the preceding year, was about 5000 tons greater than the tonnage from Febru- ary 1, 1894, to February 1, 1895. This is the result of investigation as to the business of the entire " Brockton group." An investigation as to the Brockton, Campello, and Montello stations alone gives the following result : — From February 1, 1897, to February 1, 1898, the coal rate to these three stations was $1 per gross ton. The total tonnage for the same time was 65,786 gross tons, and the revenue was $65,786. February 1, 1898, a reduction of 15 per cent was made, and from that time to February 1, 1899, the rate was 85 cents per gross ton. The result was an increase of tonnage to 70,977 gross tons, being an increase in tonnage of 5 191 tons, or 7.89 per cent. But the revenue decreased to $60,330.45, being a decrease of $5455-55 • or 8 - 2 9 P er cent of the entire revenue. February 9, 1899, a further reduction was made, from 85 cents to 75 cents a ton, and for the next year, ending February 1, 1900, the rate to these three stations was 75 cents a ton. The result was an increase of tonnage to 81,400 gross tons, being an increase of 10,432 tons, or 14.69 per cent, and an increase of revenue over that de- 68 rived from the 85-cent rate of the previous year of $726.30, or 1.23 per cent. But the revenue received for the carriage of the 81,4.00 tons between February 9, 1899, and February 1, 1900, at the 75-cent rate was less than the revenue derived from carrying the 65,786 tons from February 1, 1897, to Febru- ary 1, 1898, by $4729.25, or 7.18 per cent. The net result was that in 1899 the company carried to these three stations 15,623 tons, or 23.74. P er cen ^ more tonnage than it did in 1897, two years previous, for $4720.25, or j. 18 -per cent, less revenue. Coming to the last year, we find that from February 1, 1900, to February 1, 1901, the total coal tonnage to the three Brockton stations decreased from 81,409 tons for the previous year to 80,494 tons, being 915 tons, or between 1 and 2 per cent less than the previous year. This, it will be observed, compares the last year of full days with the previous year of eight days short, which would make the difference probably somewhat more. But the revenue for this business decreased from $61,056.75 to $60,370.50, being a decrease of $686.25 from the revenue of the previous year; that is to say, un- der the 75-cent rate the business of the last year was less than the business of the year before. The net result, then, for the last year has been that the company carried to the three Brockton stations 14,708 gross tons more than it did in 1897, for $5415.50 less revenue. To ascertain whether the increase in tonnage to the three Brockton stations has resulted from the reductions in rates, I have looked to see whether the coal tonnage of these sta- tions increased under the uniform dollar rate. This exam- 69 ination shows that the coal tonnage of the three Brockton stations from February, 1894, to February, 1895, under the dollar rate was 58,303 tons. In the next year, from February 1, 1895, to February 1, 1896, the coal tonnage of the Brockton stations increased to 70,913 tons under the same rate, while in the next year, from February 1, 1896, to February 1, 1897, the tonnage decreased under the dollar rate to 61,331 tons, which, al- though less than the previous year, was more than that of the years 1894 and 1895. Again, it appears from information already given that the tonnage to the three Brockton stations for the twelve months ending June 30, 1894, was 54,119 tons, and that the ton- nage for the twelve months ending June 30, 1895, was 57,596 tons. The following table shows the increase and decrease of tonnage and revenue of the "Brockton group" with the Brockton stations, of the Brockton stations alone, and of the "Brockton group" excluding the Brockton stations for the seven years from 1894 to 1901, and gives percentage of increase and decrease of revenue for each class each year. It is made from the table found on page 254 of the steno- graphic report, and shows the similarity of the fluctuations in tonnage and revenue in each class : — 70 Entire Group. 18.66% 18.66 3.86 3.86 12.46 12.46 7.02 7.02 9.81 9.81 3 03 3-03 17-37 .22 1.08 iS-9i 13.00 3-94 9.67 6.77 34-76 1.08 13-57 14.82 29.74 2.68 25-94 5-55 14.82 "•3« 33-15 •13 12.21 15-83 28.2 3-85 24.42 6-37 *3-44 .09 1. 19 1. 19 Montello, Brockton, Campello. 21.62% 21.62 5-19 5-i9 i3-5i i3-5i 12.83 12.83 7.22 7.22 7.26 7.26 Ent. Group, excluding Montello, Brockton, Campello. 15.88% 15.88 2.62 2.62 II.44 II.44 I.56 I.56 12-35 12-35 Tons inc. 1895 ($1.00) over 1894 ($1.00 Rev. " 1895 ($1.00) " 1894 ($1.00 Tons inc. 1896 ($1.00) " 1894 ($1.00 Rev. " 1896 ($1.00) " 1894 ($1.00 Tons dec. 1896 ($1.00) under 1895 ($1.00 Rev. " 1896 ($1.00) " 1895 ($1.00 Tons inc. 1897 ($1.00) over 1894 ($1.00 Rev. " 1897 ($1.00) " 1894 ($1.00 Tons dec. 1897 ($1.00) under 1895 ($1.00 Rev. " 1897 ($1.00) " 1895 ($1.00 Tons inc. 1897 ($1.00) over 1896 ($1.00 Rev. " 1897 ($1.00) " 1896 ($1.00 Tons dec. 1897 ($1.00) under 1896 ($1.00 Rev. " 1897 ($1.00) " 1896 ($1.00 Tons inc. 1898 ($0.85) over 1894 ($1.00 Rev. dec. 1898 ($0.85) under 1894 ($1.00 Rev. inc. 1898 ($0.85) over 1894 ($1.00 Tons dec. 1898 ($0.85) under 1895 ($1.00 Rev. " 1898 ($0.85) " 1895 ($1.00 Tons inc. 1898 ($0.85) over 1895 ($1.00 Tons inc. 1898 ($0.85) " 1896 ($1.00 Rev. dec. 1898 ($0.85) under 1896 ($1.00 Tons inc. 1898 ($0.85) over 1897 ($1.00 Rev. dec. 1898 ($0.85) under 1897 ($1.00 Tons inc. 1899 ($0.75) over 1894 ($1.00 Rev. " 1899 ($0.75) " 1894 ($1.00 Rev. dec. 1899 ($0.75) under 1894 ($1.00 Tons inc. 1899 ($0.75) over 1895 ($1.00 Rev. dec. 1899 ($0.75) under 1895 ($1.00 Tons inc. 1899 ($0.75) over 1896 ($1.00 Rev. dec. 1899 ($0.75) under 1896 ($1.00 Tons inc. 1899 ($0.75) over 1897 ($1.00 Rev. dec. 1899 ($0.75) under 1897 ($1.00 Tons inc. 1899 ($0.75) over 1898 ($0.85 Rev. " 1899 ($0.75) " 1898 ($0.85 Tons inc. 1900 ($0.75) " 1894 ($1.00 Rev. dec. 1900 ($0.75) under 1894 ($1.00 Rev. inc. 1900 ($0.75) over 1894 ($1.00 Tons " 1900 ($0.75) " 1895 ($1.00 Rev. dec. 1900 ($0.75) under 1895 ($1.00 Tons inc. 1900 ($0.75) over 1896 ($1.00 Rev. dec. 1900 ($0.75) under 1896 ($1.00 Tons inc. 1900 ($0.75) over 1897 ($1.00 Rev. dec. 1900 ($0.75) under 1897 ($1.00 Tons inc. 1900 ($0.75) over 1898 ($0.85 Rev. " 1900 ($0.75) " 1898 ($0.85 Tons dec. 1900 ($0.75) under 1899 ($0.75 Rev. " 1900 ($0.75) " 1899 ($0.75 We are thus led to the conclusion, so far as the business of the Brockton group or of the Brockton stations is con- cerned, that the increase in tonnage has not resulted from 2i-73 3-47 i3-5i .09 '5-72 1.63 7.89 8.29 39-63 4.72 14.80 13.89 32-73 •44 23-74 7.18 14.69 1.23 38.06 3-54 i3-5i 14.86 31.24 1.56 22.35 8.23 !3-4i .06 1. 12 1. 12 1.02 1.02 13.29 3-7o 2.23 16.90 10.39 6.16 "•54 5-4° 30.20 2-34 12.36 I5-72 26.87 3.84 28.20 4- H-93 1.41 28.57 3-57 10.94 16.79 25.27 6.04 26.57 5.06 13-47 .1 1.26 1.26 71 the reduction in rates, but has apparently been quite inde- pendent of the rates. This is doubtless because the cost of coal, as compared with the other total expenses of the busi- ness, either of the Brockton group or of the Brockton sta- tions, is very small, so that a reduction in the rate of the coal cuts no figure in the growth or lack of growth of the man- ufacturing industries. This is still further shown by the business in other groups. We find the same result in the business of another ad- joining, but smaller, group of towns. Harrison Square, Milton, Neponset, East Milton, West Quincy, Quincy, Quincy Adams, and Braintree form a group in which the rate for 1896 and 1897 was a dollar. In 1898 it was re- duced to 90 cents, at which rate it has since remained. Under the dollar rate the tonnage in 1896 was 1634 tons. In 1897 it decreased to 1057 tons at the same rate. The rate was reduced the next year to 90 cents and the tonnage decreased to 976 tons. In the next year, 1899, tne tonnage increased under the same 90-cent rate to 1551 tons, and during the last year, at the same rate, the tonnage has been 1520 tons. In other words, during the three years of the 90-cent rate the tonnage first fell off, then increased, then slightly de- creased, and has not yet quite reached the tonnage under the dollar rate in 1896. The three stations of Randolph, North Stoughton, and South Stoughton have had a rate in 1897 of one dollar, 1898 of 90 cents, 1899, two months at 90 cents, ten months at 80 cents, and 1900 at 80 cents. The tonnage in 1897 at the dollar rate was 51 17 tons. The tonnage in 1898 under a rate 10 per cent less was 5304 tons. The tonnage in 1899, under a rate practically 20 per cent less than in 1897 was 61 21 tons, and the ton- nage in 1900 at the 80-cent rate was 6174 tons - That is to say, a reduction in 1898 of 10 per cent in the rate was fol- lowed by an increase of only about 3^ per cent in the ton- nage, and a further reduction of 10 per cent in the rate in 1899 and 1900 resulted in only about 16 per cent increase of tonnage over the tonnage of 1897. The argument for the reduction of rates is that the in- creased tonnage will give an equivalent revenue at the re- duced rate. The investigation shows that has not been the case either in the Brockton group or in the Brockton sta- tions or in the adjoining groups. Tonnage has increased, revenue has decreased ; and when we come to examine into the question of what caused the increase of tonnage, we find that it was not the reduction of rates, because the ton- nage increased proportionately and practically in the same way under the old rate. This, as I have before stated, is doubtless due to the fact that the cost of coal is a very un- important factor in the business of the Brockton group of towns or the Brockton stations, so that a reduction of one third or one half of the coal rate upon the coal used in Brockton or in the Brockton group is a sum so small as to have no practical effect upon the conduct of the entire busi- ness of the communities for which that coal is brought. To see how unimportant this coal-rate question is to the business of Brockton, it is only necessary to apply the rate to the amount of Brockton business. We do not know how much coal all the Brockton shoe factories consume, but we have evidence as to one of the two largest, which may be fairly taken as representative. It appears that the value of the product of the W. L. Douglas factory is about $2,200,000 a year, and' that he uses 1178 tons of 73 coal, at an average cost of $5.30 a ton delivered at the boiler room, amounting to $6243.40. Testimony E. C. Packard, p. 355. If the freight on this coal were reduced 25 cents a ton, and the manufacturer received the entire benefit of it, his coal would cost $5948.90, or $294.50 a year less than he now pays. This reduction would be only ^3^,$^ of 1 per cent on the value of his product. But, to be exact, we should take into account the fact that the manufacturer in Brockton pays for coal at 2000 pounds a ton, while the railroad company transports the coal at 2240 pounds a ton. The coal dealer pays the railroad rate on the long ton and sells to the manufacturer by the short ton. The coal consumption of Douglas is therefore only 105 if long tons, and a reduction of 25 cents a ton in the freight rate upon this would be $262.75, or on h tf&.Vstt °f 1 P er cen ^ of the value of the product in the production of which the coal is used. It has appeared that the payroll of the Douglas factory is about $890,000 a year, and that it shortly is to be made, by an addition to the factory, over $1,000,000 a year. $10,000 will doubtless be more than will be expended for coal in running the factory with a payroll of $1,000,000 a year. It is obvious that the price which the coal costs in such a factory is absolutely unimportant in the question of whether the factory increases or does not increase its business. In fact, the entire cost of coal consumed in the industries of Brockton is so small a portion of the cost of production that the business would not be increased if the coal were furnished for nothing. This may, perhaps, account for the fact that none of the large manufacturers of Brockton have 74 been before you to ask for a change in rate. I believe the fact to be that the reduction in rates which has been made from $i to 75 cents has not in fact reduced the price to the consumer, but has been substantially all a reduction to the coal dealers, of whom Mr. Packard, the only petitioner who has been constant in his attendance before you, is the most prominent. The price of coal is, I believe, fixed, not only in Brockton, but in most cities and towns of like char- acter, without reference to the cost of transportation, and by a combination between the dealers. A coal dealer like Mr. Packard gets the stated price for coal whether he pays 75 cents or 50 cents a ton for transportation by rail. He gets transportation by the long ton and sells by the short ton, so that upon any rate he makes a profit of sub- stantially one fifth of the rate when he sells by the short ton. If the coal dealers paid freight by the same ton that they sell the 75-cent rate would be 84 cents. The railroad company in this case might have rested upon the fact that the petitioners offered no evidence what- ever to show that the present rate is excessive as compared with other rates for similar service on its road or on other Massachusetts or New England roads. The company had furnished all the information as to its business for which the petitioners asked. It had answered, at no small amount of labor and expense, more than two hundred in- terrogatories carefully prepared by the petitioners, cover- ing, with the answers, more than 130 pages in the record before you. These interrogatories covered almost every phase of the business of the company, and if I had not known the counsel for the petitioners I should have thought they were filed for the purpose of annoyance rather than for information. When the petitioners closed their case absolutely noth- 75 ing had been shown to indicate that the rate complained of was in excess of similar rates for similar services in Massa- chusetts or New England. The company might there- fore have safely rested upon the weakness of the peti- tioners' case. But regarding this case more in the light of an investigation than of "a case" with clearly defined issues, it seemed to me to be proper for the company to submit to the board information with reference to whether the present rate is excessive as compared with other rates for similar service. For that purpose it seemed to me that the best course was to pursue the same method which had been adopted by the board itself in similar cases. I therefore caused tables to be prepared similar to that which will be found in the commissioners' report as to coal rates in Berkshire county in 1877. See Comrs. Report 1877, p. 71. The table of the commissioners in that case does not show what stations were selected by them for comparison. I therefore caused tables to be prepared, which have been presented to you and are found on pages 275 to 286 of the report of this hearing, including all points where there is any coal tonnage from tide-water points to points between 30 and 40 miles distant from tide water. This zone of dis- tance, from 30 to 40 miles, I have taken because the dis- tance from tide-water points from which coal comes to the Brockton stations is between 30 and 40 miles, except that from Harbor Junction wharf and India Point the distance slightly exceeds 40 miles. See answer to Int. 1, Record. These tables show the distance from tide water to each 76 point within the 30- to 40-mile zone, the rate per ton on coal, the rate per ton per mile, and the tonnage of coal, with the exception of points on the Central Vermont Rail- way, where I have not been able to obtain the exact ton- nage, and therefore no tonnage is shown. The tables also show the average distance from tide-water points to points within the 30- to 40-mile zone, the average rate, the total tonnage per year of all the points, and the average rate per ton per mile. On the Central Vermont Railway there are five points in the zone. Two of these have a 75-cent rate and three a dollar rate. The average distance is 39.6 miles ; the average rate per ton is 90 cents ; the average rate per ton per mile is 2.48 cents. On the Boston & Albany there are four points, each having a rate of 90 cents. The average distance to which this rate applies is 37.2 miles; the total tonnage is 2597 tons ; the average rate per ton per mile is 2.43 cents. On the Maine Central there are three points in the zone, one of which has a rate of 65 cents, the other two of 75 cents. The average distance is 34 miles ; the average rate, 72 cents a ton; the total tonnage, 55,126 tons; the average rate per ton per mile is 2. 11 cents. On the Boston & Maine there are twenty-nine points, seventeen of which have a rate of $1 or more, the highest being $1.20 per ton. The average distance is 35.06 miles ; the average rate is 98 cents; the total tonnage is 280,- 676.85 tons; the average rate per ton per mile is 2.81 cents. The tables for the New Haven road give the coal business to all points where there is any tonnage between 30 and 40 miles distant from the several points from which coal comes to Brockton and to those points, i.e., from East 77 Providence, Harbor Junction wharf, India Point, New Bedford, and Fall River. The points supplied from Harbor Junction wharf are thirty-two in number ; the average distance is 34.25 miles ; the average rate, 76 cents per ton ; the total tonnage, 12,752 tons ; and the average rate per ton per mile is 2.21 cents. The points supplied from India Point are twenty-five in number ; the average distance is 35 miles ; the average rate, 80 cents a ton ; the total tonnage, 11,352 tons, and the average rate per ton per mile is 2.33 cents. The points supplied in the 30- and 40-mile zone from New Bedford are thirty-six in number ; the average dis- tance is 36 miles ; the average rate is 76 cents ; the total tonnage, 70,376 tons, and the average rate per ton per mile is 2.15 cents. Twenty-nine points having coal tonnage are within the 30- and 40-mile zone from Fall River. The average dis- tance of these points from Fall River is 34 miles ; the average rate is 80 cents a ton; the total tonnage, 31,877 tons ; and the average rate per ton per mile is 2.34 cents. The result of this examination is as follows : — The Central Vermont Railway, on an average distance from New London to points within the 30- and 40-mile zone of 39.6 miles, has an average rate on coal of 90 cents a ton. The Boston & Albany, on an average distance from East Boston of 37.2, has an average rate of 90 cents. The Maine Central, on an average distance of 34 miles from Portland, has an average rate of 72 cents. The Boston & Maine Railroad, on an average distance of 35.06 from Mystic wharf, has an average rate of 98 cents. 78 The New Haven Railroad, on an average distance within the 30 and 40- miles zone from all five points at tide water of 34.95 miles, has an average rate of 78.4 cents per ton per mile. It thus appears that the 75-cent rate to Brockton is 3.4 cents per ton less than the average rate for similar trans- portation of coal from tide water by the New Haven road in Massachusetts. It also appears that the Brockton rate is very much less than the rate on other New England roads for similar ser- vice, with the exception of the Maine Central, where the rate from Portland for 34 miles is 72 cents, and the revenue per ton mile is 75 cents, which is exactly the Brockton rate. To recapitulate : The New Haven carries coal from 30 to 41 miles, according to the point of departure, to Brock- ton at 75 cents a ton, while the Central Vermont and the Boston & Albany, for a similar service, charge 90 cents a ton, and the Boston & Maine charges 98 cents a ton. It thus clearly appears that, to use the language of the commissioners in cases previously referred to in this argu- ment, the Brockton rate " is not excessive as compared with the general rates charged on other roads," and that the Brockton coal rate is not in excess of the average charge for similar service to other points on the New Haven rail- road, and on other Massachusetts and New England roads. But it should also be borne in mind in this connection that Brockton is not a competitive point, and therefore its rates cannot, as this Board have frequently said in similar cases, be properly compared with the rates of competitive points. In these tables, however, I have included all points within the 30- and 40-mile zones on the various roads, 79 whether competitive or non-competitive. If only the ratal to the non-competitive points like Brockton had been taken for this comparison it would appear unquestionably that the Brockton rate is very much less than the average rate for similar service to non-competitive points on the New Haven Railroad, and on other roads in New England. In this connection, see Exhibit 7, or compara- tive statement of actual rates to competitive and non-competitive points, p. 301, Sten. Rep. In this table the difference between competitive and non-competitive rates is indicated. For instance, on the Boston & Maine the distance from Mystic wharf to Clin- ton, which is a competitive point with the New Haven railroad, is 49 miles, and the rate on coal is $1, while from Mystic wharf, 48 miles, to Merrimac, a non-competitive point, the rate is $1.25, and from Mystic to Exeter, a non- competitive point, 52 miles, the rate is $1.30. On the Fitchburg, from Boston to Fitchburg, 50 miles, competitive with the New Haven, the rate is $1 a ton, while to West Townsend, 48 miles, non-competitive, the rate is- $1.25 ; and the rate for 60 miles to Milford, a point com- petitive with the Boston and Maine, is $1.10, while for the same distance to South Ashburnham, non-competitive, the rate is $1.50 a ton. On the Albany road the rate for 196 miles, from East Albany to Allston, competitive with water transportation, is $1.05, while the rate to North Wilbraham, a non-com- petitive point, is $1.25 for 111 miles. The rate from East Albany to Worcester, 156 miles, competitive with the Bos- ton & Maine, the Fitchburg, and New Haven is $1.25, 80 while the rate to Templeton, 155 miles, non-competitive, is $1.45. On the New York Central we find the same conditions. The rate from New York to Hyde Park, 78 miles, com- petitive with water transportation, is 80 cents, while the rate from Port Morris to Wassaic, the same distance, non- competitive, is $1.25. The rate from Rochester to Geneva, 51 miles, competitive with the Lehigh Valley road, is 73 cents, while the rate from Rochester to Clarence for the same distance, non-competitive, is 84 cents. On the New Haven road the rate from tide water to Worcester, 44 miles, competitive with the Boston & Al- bany, the Fitchburg, and the Boston & Maine, is 75 cents, while the rate to Quincy Adams for the same distance, non- competitive, is 90 cents. The rate from tide water to Fitchburg, 90 miles, competitive with the Fitchburg Rail- road, is 90 cents, while the rate to South Wellfleet for the same distance, non-competitive, is $1.50. The rate from tide water to Concord Junction, 52 miles, competitive with the Boston & Maine, is 90 cents, while the rate from tide water to Mattapoisett, the same distance, non-competitive, is $1.10. If the Brockton rate is compared with rates of the same distance to like non-competitive points, it will be found that the present rate of 75 cents is very much below the average rate to similar non-competitive local points. See also, to the same effect, tables of rates to competitive points on the New York Central, as compared with rates on the same road to non-competitive points situated like Brockton, Middleborough, etc., and tables as to the same rates on the Lake Shore & Michigan M Southern Railroad. Sten. Rep. pp. 305, 306, 307. It seemed to me also helpful upon this branch of the dis- cussion to ascertain how the coal rates from tide water on the New Haven for different zones of distance compare with the rates on other roads for similar zones of distance. For this purpose a table was prepared, which is found on pages 289 to 290 of the record, showing the rates for zones from 5 miles to 115 miles, each zone being 5 miles greater dis- tance than the preceding zone, on the New Haven, Fitch- burg, Boston & Maine, and New York Central roads. This table shows that the New Haven coal rate for similar zones is less than on the other roads. For instance, in the 20-mile zone the rate on the New Haven from New Bed- ford to Taunton is 50 cents, from Fall River to New Bed. ford 60 cents, from East Providence to Taunton 50 cents. On the Boston & Maine, in the same 20-mile zone, the rate from Boston to Concord is 70 cents, and from Boston to Tapleyville 75 cents. And on the New York Central the rate for the same distance from New York to Dobbs' Ferry is 50 cents, from Port Morris to White Plains 90 cents, and from Chatham to Hillsdale 60 cents. In the 10-mile zone it will be found that the Fitchburg rate from Boston to Waltham is 60 cents, while the New Haven rate from Fall River to North Dighton, East Prov- idence to Attleborough, and New Bedford to East Free- town for the same distance is 50 cents. Other illustrations can be taken from the tables, and while they are not controlling without the tonnage I am confident that, tested by any method of examination, it will be found that the present Brockton coal rate is at least as low as, and, 82 I think, lower than, the average coal rate for similar service on the New Haven road. It will also be found, I believe, that the average New Haven local coal rate is lower than the rate for the same service on other New England roads, or on the New York Central and other roads of the middle states. In this connection, I desire to call attention to the reduc- tion in coal rates on the lines controlled by the New Haven road between the points which were selected by the com- missioners in 1887, as proper standards for comparison with other coal rates. Commissioners' Report, 1887, p. 80. For that purpose the following table has been prepared. It is a copy of the table in the commissioners' report, with the addition of columns showing the present management of the lines, over which the rates existed, the present rates, and the decrease in rates. There are 21 rates in this table, 12 on lines now controlled by the New Haven Company, and 9 on .lines now controlled by the Boston & Maine. The rates in 1886 were for cargo lots. Some of them, as the table indicates, were for net tons of 2000 pounds. The rates for 1900 are all for gross tons, 2240 pounds, and are, on the New Haven road, all for carload lots. In one case, from Boston to Stoughton, there has been an increase of 10 cents a ton, caused by eliminating half cents per hun- dred pounds in the tariff. On the lines controlled by the Boston & Maine there has been only one decrease of 10 cents, from Worcester to Hubbardston, where the rate has been reduced from $1 to 90 cents for 20 miles ; but on the New Haven there has been a decrease in 7 out of the 12 rates, this decrease varving from 10 cents between 83 South Framingham and Carlisle to 35 cents between Bos- ton and Walpole. Comparative Statement of Coal Rates i 886-1 900. Present Management. Railroad. From. To. 1 u 1 M n Dec. r B. &L. Boston (Mystic whf.) E. Billerica '9 $075 $0 75 11 Billerica 21 75 75 " N. Billerica 22 1 11 B. & M. R.R. B. & M. Boston Ballardvale 21 " Andover 23 85 Bj 11 Lawrence 26 Bs 85 " Lowell 28 8 85 N.Y..N.H.& H. B. &P. India Point (Providence) E. Foxboro JO | *I 10 85 25 Boston E. Foxboro 2li *I 10 80 3° B. & M. R.R. Fitchburg Boston Concord 20 75 75 Worcester Hubbardston 20 i 00 90 10 N.Y..N.H.&H N.Y. & N.E. Boston Walpole '9 •1 00 65 35 «« Norfolk 23 *i 20 1 00 20 Providence Coventry 18 *i 00 1 00 N.Y..N.H.& H Old Colony Somerset Mansfield 20 75 ' 75 •« Easton 20 1 00 U 25 Boston Brockton 20 80 M Stoughton 19 90 1 00 10 inc. ct Cohasset 22 1 00 1 00 Walpole Southboro 19 1 00 75 25 South Fram. Carlisle 20 1 00 90 .0 » Net ton. With reference to the claim sometimes made that New England local coal rates are higher than the local coal rates in other states, I call the attention of the board to a table, which is Exhibit 6, on page 299 of the stenographic report, showing the rates for non-competitive local coal business on the Philadelphia & Reading Railroad. These rates are very much higher than rates for similar service in New England. It has been claimed by the petitioners that the Brockton coal rate should be upon a mileage basis, and they brought 84 before you a so-called expert in transportation, who, as the result of a computation made by him as to the cost of transportation of coal, claimed that the proper rate for the transportation of coal was 1.56 cents per ton mile, which makes practically a 50-cent rate to Brockton. This wit- ness claimed that 50 cents a ton was a proper rate to Brockton, because 1.56 cents j>er ton mile was a proper rate for hauling coal, and that rate, applied to the distance from tide water to Brockton, would produce a 50 cents a ton rate. He was frank enough to admit that if Brockton was to have a rate fixed upon a mileage basis every other place should have a rate also. To ascertain how this method of fixing the rate for the transportation of coal would affect coal rates, I caused a table to be prepared showing how the rates would be changed by the application of this method to the points in the Brockton group, and also to various other points on the New Haven and other roads in New England. It is Ex- hibit 11, found on pages 313 to 319 of the stenographic report. An examination of it shows the absolute impossi- bility of fixing rates upon any basis of cost of transportation per mile even if the cost could be ascertained. It would introduce an absolute diversity of rates into groups of cities and towns doing business under substantially the same conditions, and which ought to have for all practical business purposes, and which do have, practically uni- form rates. For example, the rates from New Bedford would be 31 cents per ton to Campello, 33 cents per ton to Brock- ton, and 36 cents per ton to Montello ; and the rates from Providence would be 63 cents per ton to Campello, 66 cents per ton to Brockton, and 69 cents per ton to Montello. And the Brockton group, instead of being uniformly 75 85 cents per ton from all water ports would vary from j/ cents per ton, Fall River to Titicut, to $1.17 per ton, New Bedford to Island Creek. A tariff for coal or any other commodity based upon distance or upon cost per mile would restrict the trans- portation by rail to comparatively limited areas. If such a method were applied to the railroad tariffs of the whole railroad system of the country, railroads would cease to be of any practical benefit to the business of the country. It is absolutely impossible for the different industries to pay for their transportation in proportion to the distance or to the cost of the transportation. In considering the question of local freight rates in Massachusetts, it is important to ascertain the manner in which the business is required to be done. Railroad trans- portation is not a mere matter of applying power to trains of cars and hauling them longer or shorter distances. It involves many other, and, in some cases, much more im- portant elements. I have therefore thought it proper to show to you how the coal business to Brockton is necessa- rily done by the railroad company. The petitioners seem to assume that the coal transportation from tide water to Brockton is a mere matter of hauling trains of coal cars without taking into account, as far as I remember, even the matter of returning the empty cars. As a matter of fact we find that the coal business to Brockton and to other in- terior local points on the New Haven road is done by local freight trains, and in a comparatively small number of cars in each train. There is no "cargo business" to Brockton or any point in the Brockton group. There are no "coal trains," as such. Coal business is done by local freight trains. The freight trains by which coal is brought from East Providence to Montello make nineteen local stops ; 86 the trains bringing coal from New Bedford to Montello make fourteen local stops, and the trains bringing coal from Fall River to Montello make thirteen local stops. The same number of stops for local business are made by the trains bringing coal from these points either to Campello or Brockton. See Tables, pp. 333, 354, Sten. Rep. The cars in which the coal for Brockton stations comes are also most of them switched at two or three connections from one train to another on the route. For instance, coal cars from East Providence to Brockton are taken by- local freight trains to Attleborough, and there left. They are then switched into trains that run to Middleborough, and there left. They are then switched into trains that run to Brockton. The same is true of coal coming from Fall River or New Bedford. See Answers to Interrogatories 34 et seq. The average number of coal cars in these local freight trains is probably not more than seven or eight to a train. The difference in the expense of transporting coal in this way by local freight trains at retail, as the necessities of customers may require, and transporting it in solid train loads, as is done between Mystic and Lowell, and to some extent between tide water and Worcester, is obvious. But this is a matter over which the railroad company has no control. It must take the coal as it is offered it at tide water, and it is offered to it at tide water precisely as the necessities of the coal dealers' business demand. Coal comes to tide water either consigned to agents of the coal companies, who direct its distribution from the vessel itself, as at East Providence wharf, or to agents who 87 have capacity to store the coal, ami therefore take it into their own coal pockets, and then direct its distribution by rail at their own convenience. In either case, the railroad company is obliged to take the coal as it is offered to them by the agents, and the agents offer it to the railroad as the requirements of their business, that is, of their retail customers all over the territory reached by the railroad, may require. When the coal is shipped from the vessel, as at East Providence wharf, the agent to whom the cargo is consigned gives to the railroad company, at or shortly before the arrival of the cargo, an order for its distribution to the customers to whom it has been sold by the agent. This order is called a." distribution sheet," and in order that you might see precisely how the business is done, a con- siderable number of these sheets have been produced before you. A summary of some of them will be found in the sten- ographic report, pages 326 to 328. In many cases it ap- pears that not more than two or three cars are on the aver- age sent to each consignee. In one case a cargo went by 43 cars to 24 different consignees, and this cargo con- sisted of three kinds of coal discharged separately at differ- ent times. Where the coal comes to agents having their own stor- age pockets, as is the case with the Staples Coal Company at Fall River, and the Garfield & Proctor and the Phila- delphia & Reading Coal companies at New Bedford, it is offered to the railroad for transportation in the same irregu- lar way, that is, to meet the convenience of the consign- ees, to whom these companies sell the coal. The railroad company takes it from the coal companies' coal pockets just as an expressman takes goods from a merchant to dis- tribute to his patrons, i.e., as the customers desire to have it taken. 88 The shipments of the Staples Coal Company for two days in November and October last have been shown to you from the record books, which show that on November 21, 20 cars were sent to 10 different consignees, and October 13, 25 cars were sent to 10 different consignees, being an average of about two to two and a half cars to each consignee. You also have before you the record of shipment of coal from New Bedford and from Fall River by the Phil- adelphia & Reading, and Garfield & Proctor companies. These are to be found on pages 339 to 344, stenographic report. It will appear from this that while in some cases 91 cars to 15 different consignees have gone out in one single day, in other cases 22 cars have gone out to 7 con- signees in a day, and 46 to 13 different consignees in a day. On September 28 last the record shows that 64 cars were sent to 22 different consignees, and on the 29th of September 60 cars were sent to 18 different consignees. The statement of Mr. Sherwin, the sales agent of the Reading Company, shows the shipments by that company from New Bedford, from November 7 to November 26, 1900. From this it appears that while on February 7, 300 tons were distributed among 5 different parties, on No- vember 9, 40 tons were distributed to 2 different parties, and on the 21st 100 tons were distributed to 6 different consignees. This table shows not only in what small lots the coal is offered to the railroad company, but also the fluctuating character of the transportation. For instance, on the 15th of November only 40 tons were delivered to the railroad, while on the 19th 700 tons were delivered, 300 for one consignee and the balance for 11 different con- signees. The fluctuating character of the business causes difficulties in transportation which are obvious. When a 89 large quantity is sent out in a day the can accumulate at junctions and have to be handled, and this causes more or less delay. Illustrations of these delays will be found in the testimony on page 346. The fluctuating character of the business also renders it difficult to provide cars, especially because coal cars do not load back to tide water, but must go back as empties. In this connection a statement has been put in before you which will be found on page 332 of the stenographic re- port, showing coal on hand at tide-water points, October 1 to November 1, 1900. Examination of this shows that while on October 3 there were 44,527 tons on hand, on the same day in November there were only 15,825 tons on hand, and on November 8 there were only 12,627 tons on hand at tide water, and 66j empty coal cars were stored waiting coal to be offered to the railroad for transpor- tation. As bearing upon the question of whether you should interfere with the present rate I desire to call your attention to the circumstances under which this rate was fixed. It was fixed only two years ago, and by agreement of the petitioners and the company. This agreement was the result of an investigation lasting nearly a year before this board, and of ample negotiation and fair discussion be- tween the petitioners and the representatives of the com- pany. The rate then fixed by that agreement was more than 11 per cent less than the rate of 85 cents then exist- ing, and it was 25 per cent less than the rate which had existed for many years before the agreement was made. It is a rate which the counsel for the petitioners, and who now appears for them, stated to the board, when it was made in 1899, was "to the satisfaction of the Brockton people." 90 It is a rate which, the counsel for the petitioners stated to the board when it was agreed to, " generously gave to us" (i.e., the petitioners) "substantially what we asked with regard particularly to the coal rate." Of course it is not a rate which can never be changed. All rates are subject to change, but I submit it is a rate fixed under such cir- cumstances, by such processes, and by such an agreement of all parties interested, that it ought to stand until such a change in conditions is shown as to make it clearly appear that it ought to be changed. Suppose the question was whether the company ought now to increase the rate. Would not the petitioners say at once that to justify an increase of a rate thus fixed by agreement a change in conditions should be clearly shown? But there is no claim, much less any proof, before you that conditions have so changed as to call for a reduction of this rate. On the contrary, everybody knows that all changes which have occurred since this rate was agreed upon have been in the direction of an increased expense by the com- pany, and therefore of an increased rate. All materials are higher, labor is higher, taxes are higher, everything that enters into the cost of transportation is more expensive than when the rate was fixed. In conclusion, allow me, as bearing on this and other similar questions, to call your attention to what the New Haven Company has done for the public service in Massa- chusetts since it leased the Old Colony Railroad nearly eight years ago. It at once removed the Old Colony local rate, or arbi- trary, from the business of the Old Colony lines. This amounted to at least $150,000 a year reduction in the rates paid by the business served by those lines, or not less than $i,20Q,ooq during the eight years since the lease. 91 It has also, during this time, expended more than $7,- 000,000 in the abolition of grade crossings in Massachu- setts alone, and its expenses for similar work now ordered by the legislature in Massachusetts will be more than $1,500,000. It has assumed a large part, perhaps four fifths, of the cost of the construction of the South Union station in Bos- ton, the cost of which has been nearly $15,000,000. It has expended nearly $4,500,000 in the Dartmouth- street station and the extension of the Providence road to the South Union station in Boston, and there are still large unsettled claims for which it is liable on that account. It has expended nearly $1,000,000 for land in Boston outside of expenses of land for abolition of grade crossings and for the extension of the Providence road. It is safe to say that these expenses amount to at least $25,000,000. In addition to this there are proceedings pending for the abolition of other grade crossings, like those in New Bed- ford, in Attleborough, in Taunton, in Walpole, and on Dudley street in Boston. If these proceedings result in requiring the abolition of the crossings asked for in them several million dollars more will require to be expended by the company in Massachusetts in this manner. It should also be remembered that in addition to this the company has been required, for the improvement of the line between Boston and New York, to make, and is mak- ing, large expenses on portions of its line outside of Mas- sachusetts, as in the city of Providence alone over $2,500,- 000, and in Bridgeport nearly $3,000,000. The dividends to the stockholders have been decreased in connection with these expenses, so that since July 1, 92 1893* they have received 20 per cent less income than they had received previous to that time for many years. Most of these expenses in Massachusetts have been re- quired by the legislature to be made, and they have all been thought to be demanded for the accommodation of the public. How far the increase of business or economy of operation will show them to have been financially for the interests of the shareholders of the company it is im- possible to tell. Certain it is, however, that as between the shareholders and the public there have been enormous expenses for the accommodation of the public, a general decrease of the charges to the public for that accommoda- tion, and a reduction of one fifth of the revenue received from the public by the shareholders for the use of their property. 14 DAY USE RETURN TO DESK FROM WHICH BORROWED LOAN DEPT. 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